Are you a consumer or a producer? Everyone’s a little bit of both, of course, but you have to find the right balance between them. Striking that balance between consuming and producing income is what budgeting is all about at its core. If you struggle to budget your money — especially as an entrepreneur — this episode will help you manage your money the right way.
I always thought that if I could just out-earn my spending, I wouldn’t need a plan. It took losing my job during the recession to realize that I did need a plan. It didn’t have to be so restrictive, and money management isn’t complicated. It all comes down to how much you are producing, how much you are consuming, and planning to strategically overproduce what you are spending.
There are six categories to consider when building a budget:
- Saving: 10%
- Housing: 25%
- Driving: 15%
- Growth: 10%
- Spending: 40%
- Giving: 5-10% of your spending budget
Whether you are a W2 employee or a self-employed entrepreneur, you need a budget. When you build your budget around these categories, you can sleep at night knowing that you are taking care of your finances now and in the future.