The Secret to Personal Finance I Never Learned About in Business School
It’s funny. I graduated with a finance degree, yet knew nothing about personal finance.
Sure, I knew my way around spreadsheets and could maneuver them in my sleep. After all, the backbone of our studies taught us how to audit financial records, analyze the financial position of a firm, and dive into other technical intricacies.
But when I found myself buried in student loan and credit card debt, I found myself turning to Google
“How do I get rid of my debt?”
The list of so-called tips and tricks was never-ending. I’m sure the financial principles themselves were sound, but for whatever reason, it felt impossible to stay on track for more than two or three days at a time. The mental burnout and fatigue were real.
That’s when I realized that the reason the tips and tricks weren’t doing me any good was that none of the articles talked about the details and the reasoning behind the tips. These articles were spitting out financial recipes (so to speak) without dealing with the humanity behind our financial decisions.
In a way, personal finance is very similar to dieting. We understand the basic overarching principles of each. Regarding finance, spend less than you earn — for dieting, consume less than you burn.
[article post=”1″]As simple as these truths may seem, the emotional and psychological aspects behind each are much more complex. How do you emotionally deal with debt? How can you build new habits to replace your old ones? What can you do to mentally stay on track to achieve your goals?
Fast-forward a little bit later and within the course of one year, I was able to pay off all of my debt totaling $77,000.
The Budget Mom was my passionate attempt to begin sharing the information I learned — actual helpful information — with people to make a difference in their own lives. If finance majors like myself were never even taught the basics of personal finance, how much more challenging must it be for the general public to sift through endless information to find financial advice that works?
Each blog post and Instagram post was published with the same singular purpose: to truly help people wherever they are.
Today, I want to share the simplest secret to personal finance that you won’t learn in business school.
Simplifying Life Around Finances
When you think about budgets and personal finances, what are some words that come to mind?
Seriously… before you finish reading this article, I kindly ask you to name the top three words that you think of first.
There isn’t a right or wrong answer to that question. However, I do want to use this point to illustrate the narrative around personal finance.
Chances are that the word “organization” is not among those top three words.
Organizing your finances might sound simplistic, but oftentimes the simplest answers are the most profound and the most commonly overlooked. This is one of many key secrets that forever changed the way that I approach my budget.
Without organization, you may find that your finances cause stress and overwhelm. With organization, you’ll find it easier to tackle the challenges ahead and to stay motivated throughout your journey.
Let me give you a concrete example: Budget Categories.
Budget categories are important because they help us recognize trends and identify personal spending habits. For instance, money spent on rent or a mortgage payment would be in a different budget category than money spent on food.
Some of the most common categories include income, utilities, savings, housing, transportation, food, debt, insurance, personal care, entertainment, education, child care, and miscellaneous.
If we don’t have enough budget categories (meaning that we’ve oversimplified), then the information presented is not enough for us to notice any trends. Let’s say all of my variable spending is categorized under “miscellaneous” or “allowance.” If my variable spending is hidden behind one category, then I’m not going to be able to see specifically what I spent on clothing, impulse buys, or even takeout food.
Always remember the purpose behind why you’re doing something. In this case, the purpose of budget categories is to help us identify spending trends. Oversimplification masks the very data you want to see.
On the opposite end of the spectrum, having too many budget categories defeats the purpose of organization and simplification. Our minds become consumed with information overload instead of working towards our goal.
Now, here’s where the “personal” of personal finance comes in. Even though I’m an Accredited Financial Counselor (AFC), I can’t definitively tell you what your budget categories should be. You need to know yourself and your habits enough to create categories that make the most sense for you.
One thing is true. When you are focusing on simplifying, never sacrifice effectiveness for efficiency.
An avid coffee connoisseur, for example, might create a separate budget category for coffee. Someone who occasionally drinks coffee, however, might simply categorize that expense under “food.”
Another example might be streaming services. A family that is only subscribed to Netflix might categorize that under “entertainment.” But a family that subscribes to Netflix, Hulu, Disney+, Prime, HBO, Apple TV, etc. might create a separate category called “subscriptions.”
Find the balance between simplifying your budget categories while maintaining the integrity of the reason in the first place: so you can identify your spending trends and habits.
A Budget Station Simplifies the Home
We do our best work when we feel calm and happy. And we are the most efficient when we are in a space that facilitates those feelings.
Enter: budget stations.
I highly recommend that everyone utilize a budget station in their own life. The perfect budget station is one where everything you need regarding your finances is within arm’s reach. Your bills are there. Highlighters, pens, and sticky notes are also present. In other words, you don’t need to search for anything. The moment you sit down at your budget station, you have everything you need to handle your finances.
So why is this important?
First, this relates back to the larger theme of “organization” in more ways than one. Sure, you’re organizing your home, but you’re also eliminating any potential hurdles to productivity.
I can’t tell you how many times I used to sit down on the couch with the TV on to work on my budget. Twenty minutes later, I’d be engulfed in whatever was on the screen, finances forgotten. It’s easy to get distracted. At a budget station, you are able to focus on what you’re doing.
It also gives you a chance to dream big with your financial goals. I encourage people to create a visual board for the station that allows you to see and visualize your dream. If your budget station is conducive to productivity and constantly reminds you of your long-term goals, then how can there be any other option than success?!
Here’s the best part: a budget station doesn’t have to be fancy.
[article post=”2″]When I was living in my 800 square foot apartment, my budget station was simply my kitchen table with a bookcase next to it that held my finance stuff. Others have shared in The Budget Mom Facebook group that their station is a rolling cart. As long as your finances have a place of their own, you’re golden.
Organization Takes Practice
Organization and simplification are skills.
You have to learn it and practice it every day.
How many of us have cleaned up our home and put everything in its place, but throughout the course of the week, things aren’t returned to their proper place? Before we know it, things are messy again and the cycle repeats itself.
This is why it’s important to commit to the organization in our day-today-life. It’s an everyday thing.
At The Budget Mom, every product, every blog, every course, and every resource is focused not just on finances, but helping people achieve their goals through financial organization through envelopes, worksheets, and workbooks. It’s a visual way that resonated with me and that I’m happy to share with the world.
The truth is that you don’t need to spend money to get your financial house in order. Start with a 3-ring binder from the dollar store and begin organizing your financial plan with your own binder. You don’t need to go out to spend money for all these organizational and simplification tools.
Simplifying the way you manage your money and the organization that you bring into your routine is important for one underlying reason – to find awareness and clarity with your money so you are informed enough to take action. Without action, there can be no growth.
