Budgets! I love them: they’re just a plan made with numbers.

I help people make budgets ALL THE TIME. If you’ve never done it, it can be overwhelming…all those lines on your bank statement and vague memories of cash in your wallet that’s now gone. I’m going to break your budget down into four basic numbers – if you can get these, it only gets easier.

Your four budget numbers are:

1. Income (after taxes)
2. Hard costs
3. Mutable costs
4. Savings, Goal-money & Strategy money

Let’s break down each of these:

1. Income, after taxes
   1. This is the money you have AFTER taxes, your net income.
   2. If you’re a business owner it’s the money you have after you put aside the money you will pay for taxes, which you will do every time, before you ever think about spending it. (<– did that hypnosis work?)
2. Hard costs
   1. For personal money, this is your rent/mortgage, insurance, loan and credit minimums – anything you currently have to pay for [eg cable does not go on this list!]
   2. For business income, these are your costs of doing business: office rent, work tools or clothes, software you can’t work without – anything you have to buy to do your job
3. Mutable costs:
   1. For personal money, this is food, clothes, entertainment, cash for weed, taxis — anything you don’t have to buy, that you do buy. Yes, you have to buy food, but you can alter the amount of money you spend on it [trust me]. Yes you need to wear clothes but you don’t have to buy new ones [trust me].
   2. For business, this is your client dinners, your taxis, your newer & better equipment. The things you want for your biz.
4. Savings, Goal-money, Strategy money
   1. Your float
   2. Your emergency fund
   3. Your savings towards goals like vacation, school, down-payment, vehicle
   4. Your retirement savings and/or investments
   5. The extra money you’re throwing at loans or credit card debt to get out of it

Why know these four numbers?

Income – hard costs = money left for mutable costs and savings.

In order to up your savings/goal/strategy number — and you want to do this, no matter what — you have to:

1. Lower your mutable costs
2. Up your income

More strategy later — start with getting those four numbers. How? There’s a ton of budgeting tips and links to software here.