Rachel Cruze’s Simple 5-Step Budgeting Plan To End Money Stress

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We all need money, but none of us need stress, and yet that’s often what money — or the lack of it — brings. Various research finds that the majority of Americans are anxious or stressed about their financial situations. This isn’t surprising considering that even families earning six-figures may be cornered into living paycheck to paycheck, and that we’re constantly navigating economic hurdles like inflation and high interest rates.

Ending money stress for good will take some therapeutic or self-reflective work and possibly some lifestyle changes. But there’s also a practical, more mathematical side to the process of getting rid of money stress, and that lies in how you budget. In a recent blog post, financial expert Rachel Cruze shared a five-step budget plan that she swears by. All you need is a pen and paper to begin.

Step 1: Write Down Your Income (Even If Irregular) 

First things first: Write down your income. Include anything you get from your primary job as well as a side hustle, if applicable. And include the income of anybody else in your household, provided they’re contributing to the expenses. If your income is irregular, that’s OK, just look at the last few months of earnings and pick the month where you made the least and list that as this month’s income budget line. 

Step 2: Write Down Your Regular Expenses, Putting Essentials First 

Next, write down all your monthly expenses. Cruze believes in donating 10% of her income to charity, so remember to put that down if you do the same. Otherwise, focus first on listing “the four walls”: housing, groceries, healthcare and transportation. Then, write down how much you put into saving every month (most experts recommend a six-month emergency fund and at least 15% of your income going into retirement savings). After that, you can write down all the other monthly spending — everything from life insurance and child care expenses to subscription spending and date nights. 

Step 3: Take Your Expenses and Subtract Them From Your Income 

Cruze follows and recommends a zero-based budget. This means that every dollar you spend (or save or invest) has a purpose. Nothing is left over — and if you find that something is, budget it, don’t waste it. 

“Zero-based budgeting just means you give every dollar a job to do – whether it’s spending, giving, saving or paying off debt,” Cruze wrote. “It’s all accounted for and given a purpose. It’s the reason I love this method.”

You may find that you don’t have enough dollars to do all the jobs necessary in your financial life. Maybe you can’t afford to save or invest in your retirement. This is not uncommon, and the way to deal with this is, simply, to make more money. 

“If you’re still struggling to make ends meet after cutting expenses, don’t forget the power of increasing your income with a side hustle or selling stuff,” Cruze wrote. “Just remember to resist the urge to spend more when your income rises. That extra cash should go toward your planned expenses.”

Step 4: Track Your Expenses for the Full Month 

You have to track your expenses every day of the month. Cruze highlighted that this helps you stay accountable, avoid overspending, stay on track and make adjustments as needed. It’s also an evolving learning opportunity. You’ll get a lot of insight into how you spend and how you live, and that alone should help diminish some financial stress. 

Step 5: Create a New Budget for the Next Month 

Effective, stress-fighting budgeting isn’t a one-time thing. Once the month is done, you must start all over with next month’s budget. You don’t need to start from scratch, just use your draft for the previous month and adjust it to make it accurate for the new month. 

“I recommend creating a budget category called something like ‘Month-Specific Stuff’ or ‘Alternating Expenses’ or ‘Discretionary’ (if you like using big words),” Cruze said. “Then just add whatever lines you need for that month and delete the ones from last month you no longer need.” 

Ideally, budgeting effectively will help you save money, which should help alleviate stress. Cruze’s plan is a great one to follow, no matter your wealth status. 

Sources

• Ramsey Solutions, How to Make a Budget: 5 Steps to Create a Personal Money Plan

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