Welcome to Budgetholics! In this video I'm going to go over the 5 steps you need to take to create an effective Budget.

Step 1: Monitor your Expenses

Keep every receipt, and write everything down. Depending on what kind of person you are, you might do this on a piece of paper or you can create a spreadsheet. You can also do this using your bank’s website or mobile app. Whatever method you use, it’s important to keep a record of what you’re spending. Do this as a favor to me, write everything down for a month. I know it sounds like a lot of work, but trust me it works. After a month of writing everything down, separate those expenses into needs and wants.

Step 2: Open a Checking Account

The second step is to deposit your paycheck into a checking account. If you’re one of the people being paid directly into your Bank account, or already depositing your cash and paychecks, that’s great, you’ve already completed step 2. For those of you who are getting paid in cash or with checks, you need to immediately deposit that money into a checking account. Especially when it comes to checks, when you cash out a check, the person you’re chasing the check out may charge you 1-10% fee, and try to take another portion of that paycheck by selling you other products sold by his store. Shoutout to Minority Mindset for pointing that out. The money you get paid is the maximum money you can spend until your next paycheck. Also, avoid payday loans. Interest rates on those things can get out of hand, and you can end up owing Months of paychecks in interest.

Step 3: Build up an Emergency Fund

Next, create a separate savings account and start creating an emergency fund. Aim to save 3-6 months worth of income. This is not money that should be invested in Real Estate, the Stock Market or Cryptocurrencies, for two reasons. You want to leave this fund as reliable as possible. Your stock portfolio might go up and down, and the same holds for the price of BTC. When the time comes and you need to tap into this fund you don’t want to encounter a balance that is 10 or 30 % down. Also, when selling your stocks, you will be paying a capital gains tax, the cost of tapping into your emergency fund, increases. The second reason you don’t want the money in your emergency fund invested, is that you need it to be as liquid as possible. When selling your crypto, apart from the mining fees, you will also have to wait up to 45’ for your transaction to go through, and in the case of stocks, depending on your broker, it can take up to 5 business days. So you want this fund stored in a savings account to have cash on hand, as soon as you need them!

Step 4: Get Rid of High Interest Rate Debt

Pay-off any high interest rate debt, such as Credit Cards, Payday loans, and Student Loans. Anything that has an interest rate higher than 5% needs to go as fast as possible. Don’t fall into the trap of believing that you can get away with paying the interest while you make money in the stock market, or in bitcoin, because this is a guaranteed return you can achieve!

Step 5: Invest

Finally, you can start investing. When it comes to investing there are two things you need to keep in mind. To begin with, stay within your circle of confidence! Only invest in businesses and assets that you understand. This is the only way you can evaluate them. Ignore what others are doing, where other people are investing their money, and what the newspapers are saying. Do your own research and rely on your own competences.