Budgeting 1.0

The Numbers

  • Roughly 32% of Americans have a budget for managing monthly income and expenses
  • Another 16% of Americans think that they have a budget, but really don’t
  • College graduates are 50% more likely to have a budget than those with only high school diplomas/GEDs.
  • Only 38% of Americans have emergency savings for an unexpected $500 to $1,000 event.
  • About 30% of Americans have no money saved for retirement.

The Basics

Budget: is telling your money where to go; the ability to tell yourself “no.”

Many people think that budgeting is knowing where your money went, but that’s only a small percentage of the matter. Budgeting requires goal setting. Without a goal, the chances of derailment is extremely high. What do you want to do with your money? Instead of impulsively doing what you want, some structure and restraint will allow you to meet goals and manage unexpected financial burdens.

Minorities, particularly ethnic minorities, are more likely to encounter financial hardship. The barriers for economic stability are high for minorities. Predatory lending practices, higher insurances premiums, and lack of transparency lead to higher monthly expenses for minorities. Across socioeconomic classes, many Black and Brown working Americans support their parents and grandparents financially, due mostly to barriers and the lack of generational wealth, money that is passed from one generation to another. My parents generation, the Baby Boomers, was the first Black generation to receive open opportunities to borrow from national-level banks.

To-Do’s

The key to making a budget is to focus on your goals. I encourage you to find the space to think, to dream about your long-term goals. If money were not an issue, then how would you spend your money? Do you want to retire and not work? Are you hoping to send your children to college? Next, identify your short term goals. Do you like to travel? Want to go to the Made in America concert next year? Want to buy a home in the next few years?

Once you’ve identified some goals, build your budget. Are there expenses, like eating out or debt, that are taking large portion of your check? Eat out less by preparing your lunches ahead of time and pay above the minimums to get rid of the debt. If your rent is super high, then consider getting a roommate. If your car note is high, then sell the car and buy a cheaper, used one.

Here’s a sample budget. The extra $300/month can go towards both short-term and long-term goals; it could also go towards paying off debts, like credit cards and student loans, sooner. Without the credit card and student loan debt, you would have $650/month left over to go towards your goals, more than double your current $300/month left over each month.

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Measuring Your Improvement

  • Paying all of your bills on time
  • Minimizing your debt
  • Contributing to your long-term goals each month
  • Allowing for money to meet some of your short-term goals 3-4 times a year

Budgeting is the most important step in personal finance. Goal setting allows you to plan for the things that are most important to you. Staying committed to your budget will provide financial freedom. If you feel that you’re not able to meet all four of these criteria, then reconsider your career goals and the feasibility of your personal goals. In my case, I am planning to work and build a business on the side so I’ll have two incomes each month. If you’re a full-time student, then focus on the first two goals until you complete your academic program. I don’t recall having the ability to save during school, but that does not mean it isn’t possible!

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2 thoughts on “Budgeting 1.0

  1. Pingback: Education Fails to Solve Income and Wealth Gap | The Lucesco

  2. Pingback: Debt 1.0 | The Lucesco

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