Chasing the Fionist Dream

The need to budget.

Before we dive into how to build a budget, let’s talk about why everyone needs one.

How many times have you heard about young pro athletes filing for bankruptcy as soon as their career ends and their extravagant salary dries up? Or people who win the lottery only to be back in debt a few years later?

Your household is like a small business. You need to make sure that your income is higher than your expenses in order to stay out of the red and make a profit. 

By tracking your expenses, you will also notice when particular spending categories go up and either take action to bring them back down or adjust your budget to make sure you can afford them. This is true for monthly subscriptions as well as seasonal expenses such as summer camp.

While some people fear that budgeting will take away their freedom, there is nothing more freeing than knowing that you can afford your lifestyle.

Here are 5 steps that will help you build a budget.

1. Write down your expenses. Track every shekel you spend over the course of three months. Before creating a budget, you need to know how much you’re spending and on what. Alternatively, if you rarely use cash, look over your last three months of credit card/bank/BIT/Paybox/etc statements and see where your money went.
2. Compare income and expenses. How much money are you left with at the end of the month? Are you spending more than you earn? Less? Exactly the same? Your expenses need to be lower than your income to give you a buffer to keep you from going into overdraft (minus).
3. Find ways to cut back. Once you know how much you spend in each category, you can start looking for ways to reduce your spending. Some expenses are harder to change – such as rent, school fees or private therapies. You’ll likely have an easier time finding ways to lower cell phone bills, grocery or clothing spending, for example. 
4. Decide how much you want to save per month. Investing in your future is one of your most important expenses. No amount is too small. Even 50 shekels a month adds up. Set up a standing order (hora’at keva) to automatically take that money out of your checking account first thing after your pay comes in an learn to live on the rest. Always pay yourself first. Savings should go both toward big future expenses such as milestone celebrations as well as general savings for the future.
5. Review, rinse and repeat. No big lifestyle change should be made overnight. We’re always learning new things and optimizing our financial journey. Changes such as salary raises and new expenses are an incredibly important time to review your budget and make changes accordingly.

In our next post, we will share our very own downloadable budget tracker along with instructions on how to use it.

What are the hardest parts of budgeting for you? What are you budgeting toward?