Why budget when there’s always something more fun to do? Here’s a reason! Taking care of your finances actually improves your health, just as going to the gym enhances many health aspects regardless of boosting our physical health, such as a better mood, a sense of accomplishment, and a feeling of control. Working towards and achieving financial wellness can give us the same feelings, in fact, working on our finances can even help us achieve almost similar benefits of working out at the gym – including, but not limited to, becoming less susceptible to a number of illnesses!
Here we’ll discover what financial wellness means, the importance and benefits of implementing it into our lives, and ways to start budgeting and save money!
What Is Financial Wellness?
Financial wellness comes in two main parts: subjective and objective. Subjective factors describe the rates we can control ourselves, like our feelings of satisfaction towards our finances, financial attitudes, and behaviors. Objective factors, on the other hand, cover the status of our financial situation, and include income (disposable or discretionary), wealth, debt and inheritance.
Let’s get on the path to financial wellness with some tips and tricks to get over the mental hump of tackling finances..
Author’s Anecdote: How Focusing on Economic Health Made a Difference in My Life
Imagine feeling financially secure. What does that feel like for you? What factors and emotions are different from now? What factors are the same?
For me, it’s security for the essentials, such as housing and food stability, having money to plan for the future (for example, a house or emergency fund), and some expendable allowances, so I can treat myself (regardless if it’s something small like some ice cream, or large like a yearly vacation). Since I started prioritizing my financial wellness, I’ve been able to save enough so that my spouse and I have a solid three-month emergency fund to dip into, even if we lose our income. There’s peace to be found in guilt-free spending, knowing that buying those new clothes was something we planned for. This allows us to feel more secure and confident in our life choices.
Imagine how at ease your mind would be knowing that you’ve not just earned this vacation, but that your spending won’t affect you in the long run! How amazing would it feel to know that you don’t have to worry about rent? You see, financial wellness doesn’t only mean you’re fiscally secure, but also that you’re less likely to feel stress, which is good for your holistic wellbeing. Working with our finances takes practice and time, so don’t worry if it feels challenging at first! Try viewing this process as a puzzle, something factual and logical. It helps to treat this activity as a natural, peaceful matter. Handling our finances is a life-long process. We can continue towards our goals in life with ease when we make small, positive adjustments over time.
Tip: One great way to handle these emotions is to write them down. Check out our article on journaling for ideas on how you can help yourself process your thoughts and emotions surrounding your finances!
What’s in a Budget?
A budget is a no-judgment zone. Money is emotion-free! It’s all facts. With that in mind, a budget is meant to be used as a tool to make informed decisions on what you can afford, and a way to give tasks to your money (your monthly rent payment, for instance).
A budget isn’t:
- An evil plan to force you into living like a minimalistic monk (unless that’s your goal!)
- An attempt to control you
- Punishment for past actions
- Judgmental, harsh, or cruel
- Something inflexible or set in stone
Remember: you control your money,your money doesn’t control you! It may be hard to remember this at times – but reminding yourself what a budget is and what it isn’t can help you stay positive, calm, and consistent.
When in Doubt, Budget On
Disclaimer: This is just an example of managing your finances. It may not work for everyone. Adapt things to your needs!
Now that we’re more aware of what budgeting means, it’s time to set a budget that matches our needs and goals! We’ll be doing some writing, so grab a pen and paper or open up a spreadsheet! If you have a partner, include them too. (My partner and I have weekly “budget dates” with tea. Other budgeters we know spruce it up with wine and cheese!)
There are dozens of ways to make and maintain a budget. Here, we’re going to show you how to create a monthly budget based on the envelope method, where cash is divided into envelopes with category names on them. We’ll use the Zero-Based Budgeting system, which focuses on proactive decisions rather than reactive ones. Check out our example budget and free budget template at the end of the article to guide you on your budgeting journey.
Part 1: Listing Our Sections
- Let’s write a list of our unquestionable needs.
Here we’re talking about transportation, food, rent/mortgage payments, heating, electricity, water, phones, and the internet. Be honest, but careful. Food is a need. Fancy lattes are not. Next to each item, write the amount and due date. If it’s a yearly bill, write the estimated early amount and divide that by 12.
- Next, list current expenses.
This includes the gym, streaming services, car insurance, and debts. Again, if it’s a yearly payment, divide it by 12.
- Finally, list future needs/wants. Here are some examples:
- Savings to cover expenses for three months of unemployment
- Savings for a down payment
- A fancy camera, a new phone, or a car
- Nice coffee
- Expenses for future kids
- Savings to replace or repair that fridge you inherited from your aunt five years ago
Part 2: Distributing Our Pools
- Let’s pool all of our usable money, including savings, primary income, and supplemental income.
We’ll subtract from that and distribute it into our “envelopes,” or write it into the sections that we just created. Always start with the most important: our unquestionable needs. Give money to that section – put enough in for rent, food, and so on. For yearly items, put in the monthly amount (the goal here is to slowly build it over time).
- Repeat this process with your current expenses.
That €10 streaming service? Subtract €10 from your overall usable money and put that into its appropriate section.
- Realizing your priorities.
How much money do I want to allot to the nice coffee section each month? Do I really need unlimited ad-free music, or can that money be put towards that fridge replacement? In case there isn’t any left-over money at this point, priority-reanalysis is required. Perhaps it makes sense to temporarily cancel a gym membership (and exercise at home instead!) to tackle some debt or provide more wiggle room for unexpectedly high heating costs. One month my spouse and I cut out snacks to finally finish saving for new bicycles.
- Continue distributing your money until the pool of “usable money” is €0.
Take time to play around with it, adjust, and readjust. It’s your budget; find out what works for you.
Now that you’ve created your budget, manage it by writing down what you spend and when (this is often called an “expense tracker”). If you buy more food than anticipated this month, that’s okay! But keep in mind that the money then needs to come from another “envelope” to cover the deficit.
Our Budgets, Our Lives
Taking control of our financial wellness has the potential to benefit us in many ways. Living on a budget — or rather, living within a budget —- gives us a great tool to make informed decisions about our lives. It can increase health, decrease stress, and provide us with a sense of peace and control!