Thread by @SteeTweets

You will NEVER be wealthy if you don't learn how to budget.

No matter how much money you make you'll end up broke.

Follow this budgeting method that helped my wife pay off a 40K debt in 1 and half years.

//Thread🧵 //

A budgeting system is like a lifestyle diet.

It helps you restrict your bad habits and increase your good habits:
•you can adapt it so it fits your needs.
•you can change it as your goals change.

Let's begin 👇

1. Getting Started

You need:
•1 big book
•1 small book/app

Record every transaction you make with the small book/app as soon as it happens.

Record your entire finances in the big book once you get home.

You need to understand one thing:

Handwriting helps you mentally process better than typing.

You want to be fully aware.

Use that big book and handwrite EVERY TRANSACTION.

Now...

You'll need to have a the right foundational mindset to budget properly:

2. 4 Main Questions

To plan your budget, ask yourself:

•How much money do I have available?
•How much would I like to save?
•How much am I spending?
•How can I improve?

Let's break this down...

How much money do you have available?

•Your cash flow (income - debt payments)
•Not investments or expected debt returns

Record your definite cash flow before calculating savings and expenses.

How much would you like to save?

Be realistic: you can always increase this as your financial habits improve.

Deduct your savings from your monthly cash flow to calculate your budget.

Budget = cash flow - savings

You want to pay yourself first.

How much are you spending?

Keep track of every single time you spend money.

Including the tiny ones.

You won't be able to manage your expenses without knowing how much you already spend.

We'll cover how to manage your expenses in more detail in a moment...

How can you improve?

You want to:
•reduce bad spending habits
•increase savings
•more enriching experiences

It's okay to make mistakes...

Every month you want to get better.

That's the mentality you need to have.

Now you have the foundation, you need to STOP WASTING MONEY.

Here's the formula:

3. How to Balance your Expenses

Remember:
Budget = cash flow – savings

You pay yourself first.

Then...

You use 4 expense categories:
-NEEDS
-WANTS
-CULTURE
-UNEXPECTED

You have the final choice for which expense fits into which category.

But here is a quick guide:

NEEDS:

Expenses that you can’t live without.

e.g.
•groceries
•gas/transportation
•internet
•utilities

Be careful you don't choose a WANT for a NEED.

WANTS:

Short lived pleasantries.

e.g.
•new pair of shoes
•really expensive meal
•1st class plane ticket
etc.

They don't enrich your life like...

CULTURE:

Expenses you don't need, but enrich your life in some way.

e.g.
•books
•online courses
•mentors
•once in a life time holiday
•useful apps

These upgrade your life and give you a sense of fulfillment.

UNEXPECTED:

Expenses you didn't plan for.

e.g.
•Doctor's appointments
•Car repair
•Emergency plan flight

Having money aside for unexpected expenses will make sure you're not scrambling for money if it happens.

WANTS, NEEDS and CULTURE can be hard to decide.

Use this thought process to help you:

Do I really need this?
•if yes, it’s a NEED.
•if no, next question.

Will it improve my life in some way?
•if yes, it’s a CULTURE.
•if no, it's a WANT.

Now...

Is your WANT really worth it?

Use this thought process to help:

Can I really afford this right now without going over budget?
•if no, DO NOT BUY IT!

Will I really use this? Or will is just take up space?
•if you aren’t going to use it, it’s a waste of money.

👇

How do I feel right now? Am I buying this because I want it or because I want to feel better?
•if you are buying it to feel better, wait a month to see if you still want it.

Will I really enjoy this expense?
•if yes, it may be worth it.

It’s okay to treat yourself sometimes.

4. Reflect

At the start of each month, reflect on last month's results.

If you didn't stay under budget, don't beat yourself up.

But...

Make sure you do better this month.

Being fully aware of your financial situation gives you control in your financial future.

It may be scary at first.

But taking responsibility for every money action you take will empower you.

Remember it takes times to build a good habit.

It takes time to improve your financial situation.

Be patient.

The is a lifestyle: not a get rich quick scheme.

You just read my interpetation of the Japanese Kakeibo Budgeting Method.

Summary:
1. Get started with a big book and a small book/app
2. 4 main questions to focus on
3. How to balance your expenses
4. Reflect

Money leads to options.

The right options lead to happiness and fulfillment.

Start taking control of your life and start budgeting.

Thank you for reading this thread.

Help others get their finances under control by retweeting the first tweet.

https://twitter.com/tibo_maker/status/1491417130914439171