Creating and adhering to a budget is a crucial step towards financial success, though it can be challenging for many. To explore strategies for budgeting, Break Your Budget founder Michela Allocca joins Alexandra Canal on Wealth!
Allocca emphasizes that budgeting is “10% strategy and 90% behavior,” noting the importance of not just creating a budget, but also developing habits to maintain it. She recommends implementing financial routines once you’ve established your budget, such as conducting weekly money reviews to make necessary adjustments.
“I think one of the biggest budgeting mistakes people make is creating a budget and then never looking at it again. That’s a big one. And also not being realistic with what you’re truly going to spend,” she tells Yahoo Finance. “When you’re creating a budget, it’s perfectly normal, and honestly common, to be idealistic about how you want your spending to be in a perfect ideal state, but life isn’t perfect. Things don’t always go exactly perfectly to plan.”
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This post was written by Angel Smith
Video Transcript
Creating a budget may seem like a tough task but sticking to it can be even harder.
Here are some tips and tricks to keep you on track is Michael a lot.
She’s the founder of break your budget, Michael in a easy to budget.
But what should be the first step if you are really starting this journey?
Totally, I always say that budgeting and financial success is 10% strategy and 90% behavior.
So once you’ve created your first budget, the next highest priority is to start implementing some financial routines.
So what is a financial routine?
I say to start with a weekly money review, what does this mean?
It means you’re taking 10 minutes every week to not only review the budget that you set.
So that means tracking your expenses and looking at how you stack up but also taking a few minutes to make some adjustments because sometimes things change life happens, that’s totally normal.
And a lot of us will walk away from a budget.
The second that something goes awry or away from the plan.
So 10 minutes a week to track your expenses, look at what’s going on and make adjustments is one of the most important things you can do to be successful.
So what about when you’re struggling to stick with a plan?
Because I know sometimes it happens to me life events occur.
I I end up spending a bit more that month.
So, so when, when you wanna get back on track, what, what should you really be thinking about?
Yeah, that goes back to the third step of like a weekly money routine and that’s making adjustments.
So I like to shift dollars around within my budget.
Let’s say that, you know, I budgeted $300 for groceries and $200 for going out to eat.
And I went out to eat and I had a big meal with my friends and I really enjoyed it and I know maybe I’ll spend a little bit of money, a little bit less money on my groceries.
I’ll just make some shifts.
I’ll make those adjustments because as we, as we said, life happens and it’s totally fine if you overspend in one area, if you are able to make some adjustments in other areas, to align with that.
And what’s the biggest budgeting mistake that you often see people make?
Yeah, I think one of the biggest budgeting mistakes that people make is creating a budget and then never looking at it again.
That’s a big one and also not being realistic with what you’re truly going to spend when you’re creating a budget it’s perfectly normal and honestly, pretty common to be really idealistic about how you want your spending to be in a perfect ideal state.
But life isn’t perfect.
Things don’t always go exactly perfectly to plan.
And it’s totally ok to be realistic about what you’re actually gonna spend because if you don’t, you really are setting yourself up not only to be disappointed but also to not reach your goals.
And how does your budgeting plan differ depending on your age and your goals?
Because if you’re older, you might have a different budget than someone who’s younger, just getting out of school or starting a new job.
Absolutely.
So I recommend that people follow what’s called a zero based three bucket budget and this basically allocates every dollar of income you’re earning towards either an essential expense, a financial goal or a non-essential expense.
So, the financial goal piece of that really is important depending on how old you are and what your goals are.
So, if you’re earlier on in your career, maybe you’re not making as much money, you might not have as much room for your financial goals or your financial priorities might look a little bit different compared to if you’re older, maybe you have a little bit more income to work with in an ideal state.
And you also could be prioritizing investing or drawing down money from your retirement.
So it really depends on what those goals are and how much wiggle room you have in your budget.
But when you follow that strategy, you can get super clear on how much money you have to work with for not only your goals but your non-essential so that you can balance the both and actually enjoy your life.
Michaela.
I wanna pivot to some career advice that you have.
You suggest a 30 60 90 day plan that uh you created for someone who starts a new job.
Can you break that down for us?
Absolutely.
So a 30 60 90 day plan is a road map for you to really establish expectations and responsibilities at the beginning of a new job.
But it can also be used if you’re looking to pivot into a different type of job or you’re gunning for a promotion or something.
So what this means is within the 1st 30 days of being at work, you are taking time to really educate yourself and get acclimated, not only to the company culture, but to your team to start building those relationships, really understand the scope of your responsibility because maybe you got a taste of that in the interview, but you don’t really know right until you actually start the job.
It’s also a great time to take some trainings, get all set up and really get situated in this new role the next 30 days.
So by 60 days on the job, the goal is to start contributing.
So this means that you are becoming an active participant on your team, maybe you’re able to start taking on some projects or tasks with less oversight.
You don’t have to tap your manager on the shoulder for everything and you’re starting to take a little bit more initiative and then by 90 days, so the next 30 days thereafter, you are initiating, that means you’re fully ramped up to your job.
You’re starting to think a little bit longer term, maybe you’re implementing some new strategies or looking at process that can be improved and you are a full blown participant on that team.
You have, you know, all of your responsibilities are up to speed how that looks is obviously going to depend on the type of job you have that ramp up period could be a little bit faster, could be a little bit slower.
It’s individual, but it’s a really great guideline to start with if you are starting a new job and maybe your manager doesn’t hand you, you know, you need to do 123 on the first day of work.
