5 things you need to do before you budget

Why you shouldn’t start financial planning by making a budget

Budgeting is not the first step to a solid financial plan. Are you surprised? Have you ever sat down to create a budget and realized that you don’t really know where to start or how to even set budget amounts? That’s because most financial advisors talk about creating a budget like that’s where you begin. It’s not. A budget is a tool but it will never work unless you do some work first. And this kind of work doesn’t have anything to do with your bank balances or bills.

This work is, first and foremost, emotional work. The kind we tend to shy away from because we want a solution to our problem that’s quick and easy. “I don’t have time for any more work,” we say to ourselves. Or maybe we believe we know all too well what the emotional issues are and don’t want to face them. But we forget, personal finance is not rational, it’s emotional. The choices we make around budgeting, spending, saving and giving are not just about the numbers. We make choices based on how the action will make us feel.

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First, what type of relationship do you have with money?

In order to truly gain control and peace around your finances, you need to understand your relationship with money. Is money that boyfriend you had that you loved so much but never seemed to give you anything? Or maybe money an overbearing parent that controlled your every move? Money could also be that pair of skinny jeans that taunt you from the back of your closet, making you feel like you’re never going to reach your goal?

We all have a relationship with money. What that relationship looks like has a lot to do with how you were raised and what messages your upbringing told you about money. Were you raised in poverty? Did you always have enough? Was money a reward for good grades or chores? Did you watch your parents spend all their money every paycheck or were they constantly saving in fear?

Whatever your history with money, it affects how you see money now. It affects your spending, your saving, your debt and your lifestyle. It also affects your stress level.

Second, what do you tell yourself about your ability to handle money?

Look, we all know it’s important to have positive self-talk. And you know that it’s easier said than done. The mindset that we approach money with is no different.


Do you tell yourself that you’ll never understand this money stuff? Or do you tell yourself you have a spending problem? Maybe you say your a ‘saver’ or a ‘spender’?  Or is it all too complicated? (Which is just a fancy way of saying you’re not smart enough – ouch! Don’t tell yourself that!)

You have a specific idea of how capable you are when it comes to money. The main thing you need to ask yourself is, am I capable of doing better? If you answer no, then you need to ask yourself why? Why are you not able to manage your money better? What messages are you saying to yourself about your ability? If you said yes, then AWESOME! Good for you! Believing you can accomplish your money goals is a huge indicator that you will be successful.

Third, what are your goals for your money?

Creating a budget is all well and good, but if you don’t know where you are trying to get to with your money, you will fail. You cannot budget without knowing your goals.

Some financial advisors tell you to write out your goals for now, the next few years and then your life. If that structure works for you, then by all means, write it down. I think that it’s impossible to predict your future priorities, so start with your goals now, and know they will change.

Maybe your first goal is to pay all your bills. Or maybe you just want to know what bills you have. Maybe you want to be able to save for a vacation or buy a car. No matter what goal you have, you need to write it down and talk to someone about it. If you have a spouse or partner this is a discussion you need to have together. Not all of your goals will be the same, that’s ok. See what areas you share and which are personal goals. If you are currently on your own in the world, seek out a trusted friend. Not for advice, not to feel ashamed but because it’s easier to keep goals you talk about. It makes them real.

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Fourth, where are you at right now?

Now you need to know where you are right now in relation to those goals.

This is the part that scares people. Taking a look at where their money is going is something most people don’t want to face. There is guilt in that place. You know why I know that? Because I’ve done what I’m about to suggest to you and I felt super nervous about it. I have walked others through this step and, inevitably, they say it is the most powerful thing they have ever done related to their money. Isn’t that the way it always goes? The hardest step has the most reward?

To know where you are at right now with your money, you need to see where you’ve been.

  • Go online or drag out your paper statements. Review every purchase you’ve made in the last three months. If you are a person who rarely carries cash this will be very enlightening.
  • If you are a cash person, you’ll have a bit of an extra step. You need to save up your receipts for the next few months. Three is best. Spend like usual and chuck all your receipts in a box or something. Then tally them up
  • Group your spending into categories for each month.
  • Then find the average of your spending in each category over the three months. An average is simply adding all three months totals together for each category and then dividing by three.

Don’t worry if this sounds complicated and like way more math that you want to do. I have created a free workbook for you to walk you through this. It’s important so don’t skip it!! The workbook will walk you through the process. You only have to put in your amounts. Easy!

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Lastly, congratulate yourself!!

You have just taken one of the biggest steps towards taking control of your money. You can do this and I am super proud of you! Treat yourself to a nap, or coffee or something else that makes you feel amazing!

I want you to really pat yourself on the back here because this is not easy. It might be simple things but it’s still tough sometimes. Facing the reality of where you are and how you feel about money will release so much anxiety. Knowledge is power, especially when it comes to your money.


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