This is part of a weekly series on personal finance and wealth building.  If you care to read them all, please click on the ‘Building Wealth’ category on the right.

Most people giving and taking financial advice focus on the budget as the key to building wealth.  I disagree, but budgeting is a very important tool in the process of paying off debt, and can play a role in building your net worth by helping you live beneath your means and effectively plan and meet your savings goals.  I don’t think having a budget is a requirement if you aren’t in debt; I don’t use one, although I do track some of my spending.

One of the running themes in this series is to keep things as simple as possible to meet the requirements of the process.  My approach to budgeting is no different (and if you’ve known me for a while or remember anything I’ve written on lifting, you’ll see some similarities).

To build your budget, you first need to know how much money is coming in during a period of time.  Most people use a month, and that’s just fine with me.  We discussed how to get a good picture of your income and expenses last week.  We also need a detailed list of every bit of spending for the month.  It’s a bit of a record keeping hassle, but for this one month, it is absolutely critical that you know exactly how much you spend and what you spend it on.  As we get in to budgeting, you’ll find that you spend a lot of money on stuff you don’t need, and you’ll find a lot of waste. Continue reading