The big, bad “B” word…

Budgets are a Girl's Best Friend | Financial Literacy Advice from THINK LIKE A BOSS LADY |

And by “B” word, I am referring to… dun, dun, dun: BUDGET.

Some people say diamonds are a girl’s best friend, but those people are wrong. When you think like a boss lady, budgets are a girl’s best friend.

Forget what you’ve heard about budgets. Budgets are not “hard.” Budgets are not a “necessary evil.” Budgets don’t require a lot of math or special software or a college degree.

Budgets are actually pretty easy, and budgets are awesome. A budget will buy you a new car. A budget enables you to take that trip to Paris. A budget helps you to accomplish your life goals and works better than medication for reducing stress and getting a restful night’s sleep. And a budget will literally save your butt in a crisis.

So let’s remove the intimidating undertone from the “b” word once and for all and remember that budgets are a girl’s best friend.

When you control your budget, you control your money, and when you control your money then you become truly independent and empowered. No matter what your income level, you’d be surprised by how many doors will open when you know how to budget properly. Whether you’re still in college, just starting out your career, newly married, or have been avoiding budgets for most of your life… it’s never too soon or too late to start.

Basics of Budgeting

1. Tally up your current sources of income, and break that down into an annual and monthly number. This is your livable income and you should aim to spend no more than 90% of it on your living expenses. The other 10% should be earmarked for any debt repayment, and then savings. As you eliminate debts and increase your income, you should also aim to increase your percentage of savings. My personal savings goal started out at 5% and grew slowly to 25% or more, meaning that I spent 75% of my income each month and put the rest into a retirement fund, savings account, etc. I realize that this isn’t realistic for everyone, but the important thing is to pick a number that works for you today and adjust it over time as you are able.

2. Identify how and where you’re spending money now. You can do this in a spiral notebook, in a spreadsheet, or numerous free apps. Establish spending categories and try to track your spending backwards for the last 6 months or longer in order to figure out your actual spending trends. Break it down into a monthly average. Ex: $200/month on dining out, $1200/month on rent, $150 for utilities, $100 for cell service, $200 for shopping, $25/month towards credit card debt, etc.

3. List your long-term goals for the future. These should almost always include: paying off all debts or loans, building an emergency nest egg, and saving for big ticket items like a vacation, new car, house, etc.

4. When it comes to debts, you need to focus on paying those off as quickly as possible — especially credit cards. Student loans will understandably take longer to pay down and you should avail yourself of deferment programs and other government assistance as much as possible to limit your exposure to accruing additional debt. Credit cards, however, are the bigger danger to you because we often use them to pay for ongoing living expenses as well as luxuries, and there is a much higher possibility of crippling ourselves financially simply because we don’t understand the extremely negative financial impact of credit card interest rates.

If you only pay the minimum on your credit card balance each month and you simultaneously earmark $100/month for a retirement fund or car or house, that $100 is going to get cannibalized over the long term by the high monthly interest rate on your credit card’s outstanding balance. It’s better to focus on paying off large chunks of any outstanding credit card debt first. Otherwise your savings will eventually get eaten alive by your mounting debts.

This doesn’t mean you can’t earmark income for an upcoming trip or a hair cut and color. But you want to pay as much towards your credit card debt as you can afford without sacrificing your ability to pay for necessities like rent, utilities, groceries, gas, car maintenance, and things like that. Every month that you carry a balance on your credit card means the value of every dollar you earn is actually worth less. Pay that sucker off!

5. Look closely at your existing spending categories and build out brand new categories for how you will spend going forward in order to accomplish your goals. Ex: $20/month towards new car fund, $50/month towards vacation fund, $50/month towards emergency nest egg. Always build a “Miscellaneous” category into your budget to account for things that you might not have considered or that crop up randomly. If you don’t use that money, great! Save it. 🙂

6. Remember that you will need to adjust your spending habits in the old categories to free up the money needed to reach your new category goals. Many of us mistakenly view luxuries as necessities. Do you REALLY use that $100/month gym membership? Is there a cheaper alternative? Will you REALLY suffer if you only get Starbucks twice a week instead of daily? I want you to sincerely evaluate your spending and decide what is most important to you for the next 12 months. Choose less expensive substitutions and make peace with the idea that trade offs are in your best interest. Oh, and prepare to be surprised when your budget reveals spending habits that you didn’t even realize you had!

7. Don’t be too hard on yourself. In the beginning, you may find yourself splurging accidentally in some categories, while you underspend in other categories. Maybe you budgeted $200 for dining out and really spent $250, but you budgeted $200 for shopping and only spent $150. In that case, you are still within your budget and are on track to meet your goals. Or maybe you went $100 over budget across the board last month. It’s not the end of the world and it happens to everyone. Don’t give up! If you fall off the wagon, think like a boss lady and just climb back on.

8. Re-evaluate your budget every 3-6 months. Life is not linear and you will occasionally need to make adjustments to your categories and percentages. Your budget works for you, boss lady, so if you need to issue new marching orders then go ahead and do so. You want your financial goals to be ambitious but not so unreasonable that your budget cannot perform.

9. Don’t be fooled by financial windfalls. If you come in under budget in a given month because you spent less than you budgeted or you unexpectedly come by some extra money (maybe it’s your birthday or holiday, or dear old Aunt Mabel died), don’t take that as a green light to suddenly overspend outside of your set budget. The smartest thing to do is treat yourself to a little something extra (say 10%) and then invest 90% back into yourself by paying more towards your credit card balance next month, or adding the extra cash to your new car fund, etc.

10. It really adds up quickly. Even if you aren’t making six figures a year, you will be quite surprised at how quickly your wealth accumulates once you’ve eliminated your debt for good, and become accustomed to saving for short and long term goals. It’s very liberating to see your net worth growing each month, and to be the boss of your financial security. When you think like a boss lady, absolutely anyone at any income level can be financially independent and have the things that they want. Budgets make it possible.

Do you have a budget?
Do you use a spreadsheet or a website / app for your budget tracking?
Any advice for boss ladies just starting out with budgets of their own?

Let me know in the Comments section below.

  • Mahilani Akiona
    August 5, 2014

    I use the mint app for budgeting and have for years. Easy to use and you receive nifty text messages when you exceed pre-determined budget thresholds. I love the instant visibility on Mint’s website landing page which allows for insightful spending and savings decisions, based upon key budget categories I’ve set.

    I also use the learn vest app, also a budgeting tool …but I use this strictly for investment purposes. Investing was never a strong suit of mine, even though a self learner. It’s an easy app to watch your money compound over time, yes compounding is key! Even a dollar a day can go a LONG way! A boss lady knows this through and through!

    I’m fortunate that at the age of 31 I have zero, that’s right ZERO debt and don’t use a single credit card unless I know I can pay the balance in full that month (for those with discipline, an American Express card is the way to go). I use credit cards merely for the purpose of points to use towards travel.

    If you’re in a position of a not so great credit score or debt and don’t have a credit card, you can work with your local bank to give you a “pay card” which it acts like a pseudo credit card. Many major credit cards offer the same deal, you up-front some money, and it becomes your pool of “credit,” and it works toward building your credit back or better.

    I was fortunate enough and realized at a young age (I had a bank account at 13) that money management was critical. I had to manage a budget for extra curricular activities ie. club volleyball, money earned from chores, grades, and community service and such. If you’re a parent, it’s NEVER too soon to teach your children the value of money. My parents came from nothing, and those values of the mighty dollar stuck with me! #payitforward

    I also was fortunate that I went to a state school in which the top 2% of my high school graduation class received a full ride and extra spending money. Again, start instilling these values in your teenagers prior to college (where they potentially start accruing large debts and outrageous spending habits). If your state schools dont offer a generous scholarship there’s lots of money out there to reward a hard working student who has passion and shows potentional for future success. And it doesn’t stop here! I realized I was on my own in college and continued to educate myself. My senior year of college I took a personal finance class versus ballet (in my last semester), which helped me do my very own taxes (at least for the first year). Taxes are complex but I learned important fundamentals for the future so I could cross check my accountants work.

    After college I picked up the book, “Personal Finance for Dummies,” a very quick enjoyable read for the nonfinance guru , to keep up with the latest tips and tricks. Till this day I still recommend this book and my go-to gift for every college graduate (while of course sharing the above nifty apps as a P.S in their congrats card).

    Over the years my recipe for savings has changed and gone into flux – rightly so. This is true as your needs, goals and unexpected life changes occur. But overall this has been my formula for effective budgeting AND saving. Rainy day funds should be 3 x your monthly income- you should always shoot to save here first if you can. 401K is next as this is tax deductible! I save 3-6% a year. And the rest goes towards all the goal setting mentioned above. If you’re wondering what percentage of your annual income should go toward a car, rent or mortgage etc, see the Personal Finance for Dummies book or for helpful guidelines. Also feel free to use your employers resource line, many companies over free financial counseling as a part of your benefits program! If you have debt, follow the simple solutions from the very wise Boss Lady-in-Chief, but don’t be silly to think anything less than as a bosslady, debt payoff and savings should happen concurrently.

    Boss Lady-in-Chief…I salute, sound advice indeed!

    • boss lady
      August 6, 2014

      That is really good stuff, Mahi. I have been meaning to try Mint out. The other one people rave about is YNAB aka

      I will have to check out the Learn Vest app as well. Thank you so much for sharing your personal success story and insider tips! I salute you, fellow boss lady!

  • Ani
    August 5, 2014

    Suze Orman gives advice #4 all the time and it’s so true. This is great Lisa. You are amazing.

    • boss lady
      August 6, 2014

      Suze Orman is a smart lady. Glad you liked it, Ani!

  • sara
    August 6, 2014

    I SO needed this post! I’m going to have my husband sit down with me to create a budget this weekend – I’ve been dying to fit in a trip to Italy… Thanks for the inspiration 🙂

    • boss lady
      August 6, 2014

      So glad you could stop by and get that little extra jolt of motivation, Sara.

      When you’re ready, I’ve got a must-taste, must-see, must-do list as long as my arm when it comes to Italy. I lived in Florence, Italy, for a year and can fairly guarantee that you will LOVE it there!

  • h (@auntygeek)
    October 17, 2014

    These are great tips for budgeting. I’ve long advocated that making (and keeping to!) a budget is absolutely key and if you don’t have the funds that week/month to do something, don’t do it. It’s hard to stick to it but it really helps in the long term when things are tight or you’re saving up for something special.

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