FUNDAMENTAL FINANCE

The Basics of Budgeting

How to spend your money on what you really, truly want.

Budgets vary by person, but looking ahead is for all of us. (Photo by Monstera from Pexels)

When you think of budgets, you probably think of some soul-sucking, life-draining exercise of tracking your spending history down to the penny, then seeing if anything is left.

That’s what it used to be.

That’s the way I did it for years in my Excel sheet.

But that’s not what a budget is.

A budget is actually forward looking, with you assigning a “job” to every dollar you have. You are telling your money where to go, rather than having it dictate what you can or can’t spend.

So let’s dig into how to actually take control of the money that’s in your checking and savings accounts.

What is a Budget?

A budget is no more about numbers than baseball is about home runs.

Moneyball showed the world what Bill James and his fellow Sabermetricians already knew 20 years prior: that getting (and staying) on base is more important than hitting the ball deep, stealing, or bunting to advance a runner.

Budgeting is equally misperceived to be about the amount of money you spend, when instead it’s all about the mental framework of…