Make a Personal Budget - Shifting into Financial 5th Gear


Most people are trying to go eighty miles an hour in third gear (in a Honda Civic). Not only does it make a really annoying noise, it’s not too great for the engine and is stressful on the driver.

When it comes to your finances, you’re probably about the same – sick and tired of trying to get somewhere with only three gears. You feel like you’re giving it your all, trying your best, really cutting back on spending, yet your engine just sits there whining and whining.

You need to make a personal budget

When you make a personal budget you are now operating efficiently. You’re not trying to pump those financial pistons with an inadequately small gear. Welcome to FIFTH gear my friend. It’s faster driving, a smoother ride, and easier on your nerves. You’ll get to where you’re going – and faster.

The trick to making a personal budget is to really just do one thing: Begin writing down every single solitary time you spend money. If you buy a soda from the soda machine, you write it down. If you buy a piece of five-cent bubble gum? Write it down! When you give your son or daughter a few bucks for doing some extra chores? Write it down!

This does not have to be some fancy notebook you go out and purchase. (If you do purchase a fancy notebook in which to write down your expenses, make sure to write down the notebook as your first purchase). You can do this on some lined paper that is stapled together. You can record it on your computer.

The important thing about all of this is that you develop the habit of writing things down. This alone will move you into fourth gear.

How does writing everything down help me make a personal budget?

Well, after you’ve written down at least one month’s worth of expenses, you’ll have a pretty good idea about where and how you spend your money. You’ll also be really surprised to find how much crap you buy. Yes, I said crap.

This why most people say they feel like they’ve gotten a raise once they’re done making (and using) their personal budget. You start to realize how much money you waste and you naturally cut back. To stick with our car theme – it’s kind of like cruise control. Or, another analogy, it’s kind of like the highway patrolman waiting to pull you over if you speed (overspend).

So, you’re in fourth gear. Congratulations! You notice the engine (your checking balance) isn’t screaming for relief, you aren’t as stressed, and you’re actually getting somewhere (some extra cash on hand?).

Now that you know roughly how much money you spend per month, you can begin budgeting. This is where you spend on paper (or in your spreadsheet if you’re using YNAB) every single dollar you’ve made before the month begins. This planned, thought-out, intentional spending will somehow make your dollars go further. I promise. Once you begin operating on a written budget – with a plan – you will be in FIFTH gear. Your finances will feel relieved (you’ll feel relieved along with it), your checkbook will say thank you, and your savings account just might begin to expand its horizon.

All because you decided you wanted to make a personal budget.