How Do I Make A Budget And Stick To It?

Sam from Indiana calls in, explaining that the recent birth of his first child has made him nervous about his financial standing and he needs help creating a budget and sticking to it with his wife. Dave congratulates him, noting that having a baby often motivates people to get serious about their finances.

Dave explains that a budget is not a straitjacket but rather a guardrail, a tool to tell your money what to do. He advises couples to sit down together and decide how much they want to spend on categories like groceries and entertainment. He humorously notes that people often underestimate their grocery spending.

The key to sticking to a budget is having a shared 'why'. For Sam and his wife, the goal is to get control of their money, get out of debt, and create a great life for their new baby, changing their family tree. This larger goal makes small sacrifices, like limiting entertainment spending, much easier to accept.

Dave recommends using the free 'EveryDollar' app to track spending. This allows both partners to monitor the budget in real-time and make informed decisions, preventing impulse buys when funds are low in a particular category.

A budget acknowledges that everyone has financial limits. It gives you permission to spend within your allocated categories without guilt. Dave's daughter, Rachel Cruze, emphasizes that a budget is 'permission to spend,' allowing you to enjoy purchases you've planned for.

To successfully budget, you need a strong 'why' (like having a child), be on the same page with your spouse, have a game plan (the budget), and stick to your established guardrails.