This is a guest post from Erica Douglass. Erica sold her successful business and “temporarily retired” at age 26. Having made over $1 million online, she is now sharing her business knowledge with over 10,000 people every month at erica.biz.

Do you hate the very thought of budgeting? Does tracking every dollar you spend seem like a waste of time — or, worse, an activity guaranteed to curtail your spending “freedom”? Good news, then…you and I are a lot alike! But one month, after spending over nine hundred dollars on clothes — and not realizing it until I got the credit card bill! — I recognized I needed to rethink my assumptions about budgeting.

Overcoming obstacles to setting up your budget
Even after reading a lot of articles and several books on how to create a budget (including some here on Get Rich Slowly), none of them ever really stuck with me. I’d flip through them, thinking that they sounded great, but kept putting them off. Each month I put them off, though, was a month I veered dangerously closer to being financially “upside down”.

I realized that I had two beliefs I needed to get past before setting up a budget:

  1. I felt like a budget would take a ton of time and effort for very little return.
  2. I liked what I considered the “freedom” of being able to spend whatever I wanted, when I wanted to spend it.

The biggest issue I had to face, though, was admitting that I had a spending problem: I was spending every dime I made, and then some — and I couldn’t easily tell you where it all went.

After reading several personal finance books and becoming increasingly frustrated with my lack of spending accountability, I finally gave in, made a budget spreadsheet, and tried it for several months.

Much to my surprise, creating a budget actually gave me more freedom! Instead of having a panic attack when I got my credit card statement, thinking, “How am I going to pay this off?”, I knew where I stood every few days. Instead of forcing myself to pay cash (which is easily stolen, or used and then forgotten), I had an at-a-glance look at exactly what I was spending, and where I was spending it, every month.

But most importantly, I stopped feeling guilty every time I bought something for myself. As you’ll see in the videos that follow, I have a “fun” spending category. As long as I spend less than that amount every month on fun stuff, I don’t obsess over it. In this way, having a budget has been a huge stress relief for me.

Cash vs. credit
The final problem I had to overcome was remembering to put everything in my budget. I decided to cure this by simplifying my life. Instead of charging purchases on several different credit cards, I ordered a rewards credit card and charged everything to it.

Not only did it give me cash back for everything I charged, but I was easily able to download the data every few days from my provider’s website. I also got rid of all my store credit cards — the small amount I saved wasn’t worth the extra time and hassle to put the numbers into my budget.

Many financial authors support a cash-only system in order to help get yourself out of debt, since spending cash is more tangible than swiping plastic. However, a budget, updated every few days with data from your card provider’s website, gives you the same knowledge of where your money goes immediately. Plus, a credit card offers consumer protections, down-to-the-penny accuracy, and rewards points!

J.D.’s advice: Do what works for you. If you have problems using credit cards responsibly, it’s best to stick with a cash-only system. Use your debit card and track expenses that way. If you know that credit won’t cause you problems, consider making most or all of your purchases with a single card.

The 10-minute budget
If you’re a visual person like me, you’re going to love this. Instead of a typical text-heavy, boring budget post, I’ve boiled down the entire task of creating a budget into two videos I call the “10-Minute Budget.”

The first video is a six-minute introduction. It describes some financial mistakes I made, and how those mistakes pushed me to make a budget. (Watch to find out how I spent over $900 on clothes in one month, and how much money I saved later on!)

The second video is the actual 10-minute budget. Please take a few minutes now to download the budget spreadsheet, watch the videos, and follow along.

Stop Being a “Budget Slacker”!
Don’t make the same mistake I did and get that sinking feeling when opening up your credit card statement. Knowing where every penny goes, and being able to quickly see which expenses to eliminate should your income decline, is well worth the time investment. Creating a budget enables you to never again say “Where did it all go?” and feel the frustration of spending more than you earn. If you have 10 minutes, try this out!

If you already have a budget, please watch, too, and leave your comments on how to improve it. Or share what you do to help track your expenses…to help us “budget slackers.”

For more information on budgeting, check out the Get Rich Slowly guide to building a better budget.

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