There are few things on a battlefield more powerful or intimidating than an army tank. They’re mobile, possess incredible firepower, and are heavily-armored. And whether it be in the form of sand, mud, water, or barbed wire, they can overcome practically any obstacle.
When building your personal budget, your goal should be to model it after a tank. You’ll want it to be easy to maneuver, powerful, difficult to knock off-track, and capable of surmounting any obstacle between you and your financial goals.
This comprehensive guide will provide you with the 26 steps to building a bullet-proof budget and creating a money management system that is virtually unstoppable.
This article represents the conclusion of the expansive Master Your Money series, which details how to create a fully-optimized, values-based budget and money management system which is both stress-free and easy-to-maintain. This post is intended to serve as an all-in-one resource containing the cliff notes from each of the 26 prior articles in the series.
The Bullet-Proof Budget Blueprint
The below blueprint contains everything you need to know to build a bullet-proof budget from the ground up – even if you’re new to the concept of budgeting. If you already have an existing money management system, this article may help you identify and reinforce any weak points in its armor.
The summary of each step listed below contains a link to an article covering it in further detail for those interested. Each of those supporting articles contains a theme to drive home the concept as well as practical information to help you implement it in your own finances.
The 26 steps below are listed in logical order – each leads into the next, just like the treads on the tracks of a tank. So without any further ado, let’s move out!
1. Saddle Up Your Money Bronco
Tired of feeling like your money is controlling you and dictating your life decisions? The first step to taking back the reins of your life is fully committing to saddle up your money bronco.
Just like staying atop a wild-eyed mount, mastering your money requires both grit and determination.
Stick with it, and you’ll be able to grow your money skills from those of a financial stable-hand to champ of the money rodeo.
Once you’ve effectively shown your money who is boss, you’ll find it will transition from a bucking bronco with a mind of its own to a trusty steed which can carry you to financial freedom.
In Saddle Up, Rodeo Cowboy: Time To Master Your Money Bronco, I promised to show you how to tame your unruly finances by taking you step-by-step through the money management system Mrs. FFP and I used to achieve our own financial freedom.
2. Identify Your Location On The Money Map
Ever attempted to follow a map to a given destination while unsure of your current location? This road trip veteran has, and can vouch for the fact that it’s a recipe for confusion, frustration, and lost time.
Setting intentional financial goals is important. But successfully achieving those goals requires understanding your financial starting point so you can calculate the overall distance of your journey, identify an optimal route to your destination, plan for contingencies, and accurately evaluate the merits and demerits of potential shortcuts from your Point A to your Point B.
The Money Map: Identifying Your Financial Starting Point uses a tale of two tourists to drive home the importance of identifying your personal “You Are Here” symbol on the money map prior to beginning your journey to financial freedom.
3. Open The Door To Financial Fitness With Online Banking
Accessible. Simple. Convenient. Efficient. Automatic. These are core requirements of any successful fitness plan, as any workout warrior or diet veteran can attest. And becoming financially fit requires a money management system possessing all of these same attributes.
Ever written a check and simply hoped that it would clear because you weren’t certain what your current checking account balance was?
Imagine how much less stressful it would be to be able to quickly and easily verify your checking account balance on your phone or home computer in 30 seconds or less.
The instant access and automated low balance alerts of online banking can help you combat fraud and avoid overspending, overdraft fees, bounced checks, and credit score penalties.
Stop lying awake at night wondering if your account is still in the black. Replace financial uncertainty with confidence and Open The Door To Financial Freedom With Online Banking.
4. Take The First Steps To Automate Your Finances
Monitoring your account balances, tracking your spending, and staying on top of bills is hard. The key to building a sustainable budget is to automate as much of this as possible. This is where Mint comes in, a free money management tool that does all of the grunt work for you.
Mint serves as a one-stop-shop for understanding your financial footing at a glance, eliminating the need to consult ten different monthly statements or log in to half-a-dozen different online accounts.
It also automatically tracks your income and spending, creates starter budget categories, reminds you of bills, and notifies you of critical low balances in your accounts, with little to no work needed on your part.
In the words of Mint’s founder, Aaron Patzer – “I really just wanted to take the work out of personal finance. That was the inspiration for Mint.com, to make personal finance easy and accessible for everyone, so you don’t have to do accounting.”
Read Personal Finance Made Easy: Master Your Money With Mint to learn how to take the grunt work out of personal finance.
5. Position Your Bill Pay Safety Net
The average American household receives 14 bills per month, making bill payment a fact of adult life. The question is not whether you have bills, but what sort of system you use to keep track of them and pay them on time.
The mortgage, home equity, credit cards, student loans, auto loans, electric, gas, water, sewer, cell phone, internet, television… the list of bills to remember and pay each month goes on.
Whether due to misplacing a bill, forgetting to mail a payment, or accidentally dismissing a cell phone reminder, it’s easy to slip up and miss a payment.
But forgetting to pay just one bill can cost you dearly in the form of late fees, interest rate hikes, and a credit score drop of as much as 110 points.
Put that possibility in the rear-view mirror and never forget a bill again by using Mint’s built-in safety net. To learn how you can stop playing with fire, check out Mint To The Rescue: Your Bill Pay Safety Net.
6. Capture The Triple Benefits Of Online Bill Pay
Ever mailed a bill payment and simply crossed your fingers that it would arrive by the due date? Or been on pins and needles for days, watching your bank account in an attempt to determine whether your payment was received on time?
Stop the madness! According to this USPS map tool, cutting out the middleman by paying your bill online can effectively extend your bill pay grace period by up to three business days.
And that’s not all. The typical person can easily save $145.30/year in postage costs with online bill pay. Thanks to the power of compound interest, this savings grows to $130,200 over the average adult lifespan if invested.
Last but not least, paying your bills online will help reduce the 5.4 million tons of mail discarded after after use annually in the U.S., which totals 13% of all paper waste in the country.
For a closer look at the numbers behind the triple benefit of online bill pay, reference De-Stress, Save $130,000, & Preserve The Planet With Online Bill Pay.
7. Lay The Bricks Of Your Financial Foundation
Ensuring that your financial transactions are properly reported, categorized, and tracked by Mint is essential for using its Budgets and Trends functionality to analyze and understand your spending habits later on. As the old adage goes, “garbage in, garbage out”!
Think of your transactions in Mint as bricks that must be laid in a level and uniform fashion to construct a long-lasting and high quality foundation for your money management system.
Taking the time to properly configure and familiarize yourself with the features of Mint Transactions is crucial to ensure that the bricks in your financial foundation stay both straight and level as they are laid.
So stretch that string, break out that level, and do the prep work now to ensure that your budgeting foundation will be built correctly, one transaction – and brick – at a time.
For a comprehensive guide to everything you’ll ever need to know about Mint Transactions, check out Laying Your Financial Foundation: A Guide To Mint Transactions.
8. Cover Your Budgeting Bases
The key to creating a budget that is freeing rather than limiting is to reverse-engineer every aspect of it from your financial goals. This makes and keeps your goals the primary focus. The Financial Freedom Project Budget contains four bases, just like a baseball diamond:
- First Base – Income
- Second Base – Bills & Required Spending
- Third Base – Savings Goals
- Home – Discretionary Spending
Using your income to pay for bills and required spending on things like groceries first is simply common sense. But funding your savings goals next is the key to ensuring your discretionary spending doesn’t prevent you from reaching them.
Whatever unallocated income remains after subtracting your bills and savings goals is available for discretionary spending, free and clear.
To learn more about the logic behind the four bases of budgeting listed above, check out Cover Your Budgeting Bases: Position Yourself To Win With Money.
9. Avoid The Unexpected Bill Scramble Drill
You open up your mailbox and there it is – that forgotten annual bill for your auto insurance, home insurance, or property taxes. You open it with trepidation and baited breath, wondering the extent of the damage. Your heart sinks as you realize the amount due will throw all of your finances off-balance for several months.
Like a quarterback blindsided in the pocket, becoming aware of and dealing with a bill you didn’t anticipate can be a painful experience.
Late fees and/or credit card interest can leave your finances battered and bruised.
If unexpected or irregular bills have had you scrambling in the past, you’ll be relieved to know there’s a simple solution.
The answer lies in using dedicated savings accounts to save monthly for each of your non-monthly bills. This will permanently end your unexpected bill scramble drill while enabling you to better calculate your true disposable income each month.
It also positions you to take advantage of things like annual pay-in-full discounts, which we use to save $465.96/year. This is where your sinking funds blitz-beater pulls double-duty. Not only is it protecting your blind side, it’s saving you money at the same time.
For more specifics on how to shore up your budget protection, check out Beat The Blitz: Avoid The Unexpected Bill Scramble Drill.
10. Start Thinking Like A CFO
Business managers are often confronted with difficult decisions regarding how to allocate net profit. They must ensure the long-term viability of their business by investing in its future, while also keeping shareholders happy via dividend payouts.
As the CFO of your household, you will have to decide how to allocate your monthly budget surplus.
What percentage will you use to invest in your future by way of savings?
And what amount will you allocate to dividend payouts in the form of discretionary spending?
To learn how to calculate the net profit of your monthly budget, read Become Your Own CFO: Calculating Your Monthly Net Profit.
11. Harness The Power Of Being Selfish… w/Yourself
Selfishness is typically not a trait to be pursued, developed, or cultivated. But when it comes to your financial freedom, all of that conventional moral wisdom goes right out the window.
You can put down the torches and pitchforks – I’m not talking about being selfish when it comes to the way you treat OTHERS. I’m referring only to the importance of cultivating selfishness in your future self when it comes to its dealings with your current self.
It’s easy for the current version of yourself to fritter away money without truly gaining any substantial happiness.
On the other hand, delayed gratification can result in a truly shocking level of savings.
Compare the joy of discovering a $20 bill in your coat pocket with the happiness obtained by buying a vending machine snack every day for a month. They’re typically not on the same level.
Cultivating selfishness in your future self by foregoing discretionary spending today in favor of saving for your tomorrow can power you all the way to financial freedom. Learn more about the power of delayed gratification in Gimme Hands: The Power Of Being Selfish… With Yourself.
12. Beat Murphy’s Law With A Classic Car Accessory
Murphy’s Law – Anything that can go wrong, will go wrong. We all know this old adage. And I’d wager that most of us have lived it and can lustily vouch for its accuracy. So the question becomes, how do you Murphy-proof your finances? I submit that you can do so by copying a design element dating back to the early days of “the motorcar”.
The fender-mounted spare tire was standard issue on all early 19th-century automobiles. It was intended to equip the driver in advance with what they needed to overcome a bad situation in future.
No driver knows exactly when they’ll suffer a punctured or blown tire. But what they do know is that it can happen at any moment. And thanks to Murphy’s Law, it will happen sooner or later.
You may not be able to prevent the effects of Murphy’s Law from taking place, but you CAN prevent them from putting you in a state of financial emergency. The key to beating Murphy’s Law is to acknowledge its validity and to prepare for its effects in advance.
An emergency fund can help you de-stress your financial life and circumvent the wealth-killer of credit card debt. To read more about the logistics of sizing and storing your emergency fund spare tire, check out Beat Murphy’s Law With… The Classic Car Emergency Fund Model.
13. Create Your Financial Freedom Shopping List
Shopping lists keep you focused on what’s important while running errands, and help you avoid forgetting a critical ingredient or purchase.
Creating a savvy financial plan requires the same type of forethought and planning. So take some time to draw up your financial shopping list when it comes to your ideal future.
What are your financial goals? What is your ideal future lifestyle?
Once you have your list in hand, it’s time to calculate the price of each item on it.
Price tags influence our shopping behavior in many ways. Similarly, the price tag of your savings goals will influence the saving and spending decisions in your monthly budget.
To learn how to check the price tags of the items on your financial freedom shopping list, read Your Financial Freedom Shopping List: Checking Your Savings Goal Price Tags.
14. Survey The Wealth Of Your Debt Mother Lode
If not handled with care, debt can be as dangerous as a short-fused stick o’ dynamite. But if you’re already in debt and your money situation feels as cramped as a claustrophobic miner trapped deep underground, you’re already acutely aware of how dangerous debt can be.
So let’s pivot and instead explore a far more encouraging aspect of debt – it’s hidden wealth potential. Yep, you read that right. If you’re in debt, you are sitting on a potential mother lode of riches.
Think of each of your loans as a gold mine. The required monthly payment for each loan represents the potential income you can re-claim by working that particular mine until the loan is paid off.
The remaining interest you’ll pay over the life of each loan represents the vast store of potential wealth in each mine which you can claim for your own. Extra payments constitute the pick-axe and shovel which you’ll need to extract these riches.
Working the mines of your Debt Mother Lode can pay large dividends – all you need to do is put in the work needed to reach pay dirt. Read more about the hidden wealth potential of your debt in Strike It Rich By Mining Your Debt: There’s Gold In Them Thar Loans!
15. Select Your Mount In The Debt-Free Derby
Like matching the strengths of a racehorse to the characteristics of a specific track, you should customize the approach you use to pay down your debt to meet your specific circumstances.
You need to evaluate the top two thoroughbreds in the debt-free derby to determine which is the better mount for your financial racetrack – Debt Snowball or Debt Avalanche.
Will you put your money on the prototypical fast starter, or the determined long-strider who takes the lead on the final straight-away?
Neither mount is a guaranteed winner on every single track or in every financial situation. Each have their individual strengths and weaknesses which make them better suited for some circumstances than others.
Which debt reduction method will you put your money on and ride to the debt-free finish line? Compare the two in detail in The Debt-Free Derby: Debt Snowball vs. Debt Avalanche.
16. Build Your Savings Goal Ladder
Working a job that pays the bills but leaves you exhausted, lacking in patience and willpower, and merely surviving rather than thriving in your time off the clock will leave you permanently settling for the low-hanging fruit in life.
There’s more to life than simply knocking yourself out to provide for yourself or your family.
Learn how to prioritize your savings goals in the most mathematically efficient way and use them to build a ladder rung-by-rung that will enable you reach the finer things in life.
Mint provides an excellent way to list, monitor, and track your progress towards savings goals. Learn all about how to do so in Reach The Finer Things In Life: Build Your Ladder To Financial Freedom.
17. Power Up Your Finances With Super Mushrooms
Time to go all the way back to 1985 to take a lesson from the most iconic video game in history – Nintendo’s original Super Mario Bros. When Mario consumes a Super Mushroom, he becomes significantly more powerful and capable of new things.
Savings goals can boost your financial capabilities just like Super Mushrooms can Mario’s.
Each time you complete a savings goal, your financial position becomes that much more powerful. And with each savings goal completed, you become financially capable of new things.
But before you can power up your finances with Mint savings goals, you need to reconcile their impact on your monthly budget.
Super Mushrooms: Powering Up With Mint Savings Goals will help you do that by serving as your strategy guide to beating the savings goal level in the Mint video game.
18. Find Your Footing On The Save-Spend Tightrope
How much of your discretionary income should you save? And how much of it is okay to spend on splurges and guilty pleasures?
These are loaded questions, and one-size-fits-all formulas aren’t the answer. Personalities, incomes, and lifestyle goals differ. Your budget should reflect YOUR ideal, not someone else’s.
Properly weighting your saving and discretionary spending is a balancing act with high stakes.
Lean too far towards spending, and you put your financial freedom at risk. But save too aggressively, and you may find yourself chafing under a budget that feels restrictive rather than freeing.
Learn how to find your ideal balance of saving and spending in A High Stakes Balancing Act: Mastering The Save vs. Spend Tightrope.
19. Reconcile The Spending Of You & Your Spouse
One of the great mysteries of life is that all of us are born as either natural savers or spenders. And while some birds of a feather may fly together, the old “opposites attract” idiom is proof enough that this isn’t always the case.
A 2015 Love & Money study by TD Bank found that 63% of Americans overall and 83% of Millennials believe their significant other overspends in some way.
If you share your finances with someone who possesses spending habits which differ wildly from your own, give the concept of “allowances” or no-questions-asked personal money a try.
This approach works wonders if you’re a spender that married a saver, or vice versa. We found that it provides independence and autonomy for both parties while maintaining the simplicity and transparency of shared finances.
If the spending habits of your significant other ruffle your feathers, read The Art Of Compromise: Reconciling Wildly Different Spending Habits to learn how Mrs. FFP (a spender) and I (a saver) managed to reconcile our wildly different spending habits as newlyweds.
20. Employ Naval Tactics To Combat Overspending
During the Age of Sail, uncharted reefs posed a serious risk to ships navigating previously unexplored waters. In a similar fashion, overspending poses a serious danger to even the best-laid financial plans.
After all, what good is a perfectly balanced budget on paper if it doesn’t reflect reality? Allotting $100/month in your budget for eating out does you no good at all if you end up charging twice that to your credit card.
Short of simple willpower, there’s nothing in your budget preventing you from scuppering your savings goals by overspending.
Ship captains in the Age of Sail safeguarded their ability to reach their destination by setting a daily allotment of food and drink per sailor aboard. Meal rations were enforced by tasking a neutral third party with serving up portions for sailors.
You can prevent overspending by eliminating your ability to overindulge in a similar way. Numerous studies have found that carrying and using only cash to pay for expenses is an effective solution for overspending. So your neutral third party involves leaving the plastic at home – both your debit and credit cards.
If you or your spouse tend to overspend, protect your ability to reach your financial destination by putting your discretionary spending on rations. Keep your budget out of the briny deep with A Tactic From The High Seas: Combating Overspending.
21. Grab Your Ticket To Stress-Free Spending
When you treat yourself by indulging your taste buds, buying that item in support of your favorite hobby, or splurging on your favorite vice, you expect to obtain a feeling of fulfillment, satisfaction, or reward. But the typical joy of discretionary spending can be quickly dampered by the stress of financial uncertainty, fear, guilt, shame, regret, or worry.
Animals at a zoo never have to worry about where their next meal will come from. Locating a viable water source and escaping predators are also on the list of their non-existent concerns.
Compared to their wild counterparts, the lives of zoo residents are relatively care and worry-free.
You can ensure your discretionary spending remains as stress-free as a well-fed animal in the zoo by paying yourself and your savings goals first.
Follow the blueprint contained in Life At The Zoo: Your Ticket To Stress-Free Spending to give yourself worry-free permission to spend.
22. Flee The Robber Baron Of Your Current Bank
In early medieval history, some feudal landowners turned their hand to lowbrow tactics to supplement their income. Their insidious acts ranged from merely charging excess tolls to highway robbery and even kidnapping for ransom. Such scoundrels gave rise to the term “Robber Baron“.
While unfortunate, you may think that this tale of highway banditry perpetrated hundreds of years ago doesn’t concern you. But I’m here to tell you that it does. Because there’s a modern-day robber baron afoot, masquerading as your friendly bank.
Exorbitant bank fees and unjustly low interest rates are the new highway robbery. And if you’re not careful, you’ll find yourself being relieved of your hard-earned cash faster than a waylaid medieval merchant.
Bank fees are currently big business. The 2017 survey performed by Chime Banking found that the average American loses $329/year ($27.42/month) to these fees. Think that’s not so bad? That totals $325,187 if invested over the typical adult lifespan.
This is no small pilfering scheme, but full-fledged highway robbery. Find out how much you’re currently paying in bank fees and how we avoid them in Flee The Robber Barons: Avoiding Exorbitant Bank Fees.
23. Choreograph Your Cash Flow Dance Routine
Figure skating performances on the Olympic stage contain a great deal of choreography. Each and every movement on the ice is part of a carefully composed overall sequence.
The timing of your income in relation to that of your bill payments, spending, and transfers to savings requires this same careful attention to detail.
If your income and expenses get out of step with one another, even a budget which is perfectly balanced on paper can still put your account balance in the red and give you the headaches and stress that accompany an overdrawn account.
Income of $2,000 and expenses of just $1,000 may sound like a healthy financial situation, but could still result in overdrafts if the timing of the associated transactions isn’t thought through.
You can break out of the paycheck-to-paycheck cycle by creating your very own financial dance routine. Download a copy of the free Cash Flow Choreography Worksheet by checking out Dancing On Ice: Designing Your Cash Flow Choreography.
24. Taste-Test The Secret Budget Sauce
Whether in the form of a homemade cranberry sauce, a mouth-watering BBQ glaze, or some pain-inflicting fire juice, every King or Queen of the Kitchen has a secret concoction that only they can make. A sauce that transforms a dish into something people talk about for days.
It’s time to create your very own secret budget sauce in the form of an automatic hidden bonus. And we’re not talking mere chump change here, but nearly 10% of your annual income.
This secret sauce can make your budget truly special by delivering an automatic hidden bonus 2-4x per year that can rival the joy of tax return season, Christmas, and birthdays.
This hidden bonus can put the finishing touches on your budget by providing the money you need to end the stress of living paycheck-to-paycheck, build and replenish your emergency fund, and blast away your debt – even if your annual income remains static.
Find the full recipe in The Secret Budget Sauce: Your Automatic Hidden Bonus.
25. Save Money & The Planet by Going Paperless
Like twin flowers in a field, going paperless offers dual benefits – the opportunity to save money and reduce your environmental footprint at the same time.
Financial incentives to go paperless allow us to save $124/year, a sum which can total $123,315.41 if invested over the typical adult lifespan.
Paperless billing and banking allows you to reduce your household’s impact on deforestation, water and fossil fuel consumption, and greenhouse gas emissions with minimal effort.
Going paperless can also extend your bill pay grace period, help you avoid overdraft fees and identity theft, and declutter your kitchen table or home office. This is one of those rare win-win-win situations – if enough of us take advantage of it, the legacy we leave behind for future generations will be rich in more ways than one.
Become a better steward of your time, money, and environment by reading Go Green & Save: The Benefits Of Paperless Billing & Banking.
26. Simplify Your Life With Automatic Bill Pay
Work. Errands. Relationships. Kids. Sometimes there’s simply too much going on to keep it all straight. The time demands of life in modern society can make it easy to feel like life is living you these days, rather than the other way around.
You can cope by kicking back and relaxing with the smooth sailing offered by automatic bill pay. Doing so can increase your free time, reduce your bill pay stress, and lighten your mental workload.
When implemented properly, automatic bill pay can simplify your bills and your life while providing you with a leak-proof bill pay system.
Got kids? Automating your bill payments and reclaiming that time spent licking stamps or logging in to service provider websites can help you give them a major leg up on life.
Build An Unstoppable Budget
There you have it! Implement these 26 concepts using the how-to information contained within each related article above, and you’ll have a smoothly-operating, values-based budget in place which can overcome nearly all obstacles to deliver you to your goals.
To my loyal readers who have been following this Master Your Money series from start to finish, thank you and well done! You should now be firmly in command of your finances and ready to move on as we prepare to cover strategies focused on saving money.
If you’re a new reader and would like to digest this series one step at a time, you can work through each of the full posts in order using the “Next” article links at the bottom of each.
If you know someone looking to gain control of their finances, consider sharing this post with them using the buttons below!
Reader Question – Can you relate to any particular one of these 26 steps more so than another? Share your favorites in the comments!