---
title: 'Video 7GSGA8SVsOs'
source: 'https://youtube.com/watch?v=7GSGA8SVsOs'
video_id: '7GSGA8SVsOs'
date: 2026-07-02
duration_sec: 615
---

# Video 7GSGA8SVsOs

> Source: [Video 7GSGA8SVsOs](https://youtube.com/watch?v=7GSGA8SVsOs)

## Summary

This video provides a comprehensive guide to budgeting, emphasizing its importance as the foundational skill for financial management. It covers various budgeting methods, from simple pen-and-paper tracking to automated apps, and explains key concepts like necessary vs. unnecessary expenses, the 50-30-20 rule, and the envelope method. The core message is that budgeting is essential regardless of income level and that understanding your cash flow is the first step to financial control.

### Key Points

- **Budgeting is the most important money topic** [00:00] — Budgeting is the most crucial skill for managing money, and you must get comfortable with it before anything else. You don't need a lot of money to start; even $10 a month needs to be accounted for.
- **Basic definition of a budget** [00:44] — A budget is an estimate of your income (money coming in) and your expenses (money going out). It can be as simple as a two-column list on paper or automated via apps.
- **Philosophical approaches to budgeting** [01:16] — Different strategies exist, such as 'pay-yourself-first' (saving first) and 'zero-based budgeting' (assigning every dollar a category). A 'money diary' can help understand spending patterns.
- **The golden rule: expenses should not exceed income** [02:16] — The most basic rule is to finish each month 'in the black' (money left over). Spending more than you earn puts you 'in the red', often leading to debt.
- **Methods for tracking a budget** [02:42] — Methods range from Google Sheets and apps like Mint to literal pen and paper. The best method is the one you'll stick with.
- **Categorical budgeting and the envelope method** [03:37] — A traditional budget assigns a monthly amount to each category (rent, food, etc.). The 'envelope method' uses physical cash in labeled envelopes for each category to enforce limits.
- **The 50-30-20 rule** [04:48] — A popular method: 50% of income to necessities, 30% to wants, and 20% to savings/debt. It's a zero-based budget but can be inflexible (e.g., in high-cost cities).
- **Distinguishing necessary vs. unnecessary expenses** [05:32] — This is the hardest part. Be honest about what you truly need to get by (rent, basic groceries, utilities). Subtract necessities first; the remainder covers wants and savings.
- **The importance of tracking spending for a realistic budget** [07:25] — A money diary helps avoid underestimating expenses. A realistic budget you can stick to is better than an overly strict one that leads to failure.
- **Budgeting is about control, not perfection** [09:09] — It's okay to make mistakes. The goal is a clear understanding of your cash flow. Experiment with methods to find what's sustainable. It's never too early to start.

### Conclusion

The power of a budget lies in giving you control over your money, not in restricting you. Start budgeting now, no matter your income level, to build a clear picture of your finances and work towards being 'in the black'.

## Transcript

So the first topic we want to cover here when it comes to getting good with money is how to budget. Now this is probably the most important topic that you will ever learn about when it comes to money
and one of the things that you will have to get comfortable with before anything else can happen. There are tons of different strategies out there for how to budget and how to make the most of your money and some of them are more hands-on than others.
But as I mentioned in the intro, the most important thing here is that you do not wait to have a lot of money in order to start budgeting it. If you only have $10 a month, you need to account for every one of those $10, where they're coming from and where they're going, and then what you want to be doing with them.
But let's do a quick, basic definition of a budget. A budget is an estimate of your income, the amount of money you're bringing in and have available to spend, save, or invest, and your expenses, all the things that you need to spend money on.
It can be as simple as a piece of paper split into two columns where you jot down all of your paychecks, gifts, and so on in one column, and all of your bills, purchases, grocery costs, and so on in the other. They can, of course, also get much more complicated than that or can be automated through various apps and programs that help sort your budget for you.
And just like there are many different ways to track the nuts and bolts of a budget, there are also many different philosophical approaches to budgeting. Some people approach budgeting with a straightforward pay-yourself-first strategy, where they set
aside money first thing every month to be saved before sorting out all of the other money into different categories. Others practice something called zero-based budgeting, where every single dollar is assigned a category with nothing left over at the end of the month.
These strategies are a bit more involved, but they can easily be mastered once you've gotten used to the basics of understanding your budget. If you aren't sure of where to start with budgeting, try keeping a money diary or writing down every purchase that you make for a given period of time.
It will help you start to understand patterns in your spending so you can get an idea of how much money you want to be dedicating to each category, as well as some of the things that you probably want to cut out. But no matter your individual strategy, the most basic thing to keep in mind about a budget is that, simply put, your expenses should not exceed your income.
You want to finish every month in the black, meaning that you have money left over with which to save or invest, but more on that later. If you spending more than you bringing in that means you in the red for the month or that you spent more than you earned and you may still owe that money like on a credit card or to someone you might have borrowed it from The most traditional budget there is is what we mentioned before a simple list of the money coming in compared with a list of the money going out
You record your income and assign it a category, things like scholarships or bursaries, student loans, paychecks, parental contributions, gifts, etc. Now, there are many ways to budget this income
depending on how hands-on or hands-off you want to be. Some people swear by the old-school Google Sheets method, of which there are plenty of examples, including on the financial diet. But others, myself included, prefer apps like Mint,
which help automate the categorization and analysis of all of your different spending and income. Others still prefer to use a literal pen and paper because they find that actually writing these things out and doing the calculations themselves
helps keep them accountable and very aware of every single line in their budget. No matter which method you pick, though, you'll generally have some basic categories of expenses that you'll need to track. Things like rent, bills such as your internet or cell phone, transportation costs, food categories, etc.
And from there, you can get even more granular if you're trying to see exactly where your money goes. Categories that tally up just things like coffee expenses or purchases for a specific hobby. In a traditional budget, each category is assigned an amount per month.
And you may vary month to month in terms of exactly what you're doing within that category, but the idea is you never exceed the amount in any given category, which helps keep you under budget overall. And if you want to stick to a categorical budget but simply don't trust yourself if
you're not actually budgeting with the physical money itself, a similar but very tactile budget strategy is called the envelope method. You literally take a stack of envelopes labeled with your expense categories, and whatever
money you put in each of those envelopes is the only money you can use for that category that month. The envelope method is obviously rather labor-intensive, but many people do find it very helpful to totally realign how they think about money and start fresh on a very accountable budget.
Also keep in mind, for big recurring expenses like your rent or utilities, you may not want to keep them in envelopes. You may want to just simply automate those bills out of your checking account so you don't have so much cash on hand all the time. Another popular budgeting method is the
50-30-20 rule. The bare bones of it is that 50% of your income should go to necessities. We'll get there. 30% goes to things that you want, and 20% goes to savings or paying off debt. And some people
do prefer to swap those last two so 20 is going to wants and 30 to savings And this is a very effective way for many people to budget because it a zero budget meaning that every single dollar is allocated But it also a bit inflexible because for example you may live in a place where it not realistic for your total
necessary purchases each month to fall under 50% of your take-home pay. Here in New York, for example, you'd have to be earning quite a lot in order for that to be the case. But then comes perhaps the most difficult part of budgeting, especially if you're someone who, like me,
has a tendency to slip into that treat yourself mentality or confuse things that are nice to have with things that are need to have. And that is understanding the difference between necessary and unnecessary expenses. Especially when you're in a time that you need to be really focusing on
savings and ramping up the amount that you're able to put away each month, becoming very, very clear and tactical about really separating necessary versus unnecessary is of the essence. So you have
to be super honest with yourself. What are the basics that you need to get by each month? There should be a basic minimum grocery bill, things like your rent, although in many cases you could arguably find a different living situation in which your rent would be lowered, things like
your basic utilities, internet, cell phone, etc. And once you have identified in a very honest and clear way what your absolute necessary expenses are, those need to be taken out of your budget
first and foremost. By subtracting this amount from your monthly income, you get a clear number of what you have left over for everything else. And that everything else has to represent both your unnecessary expenses and your savings slash debt repayment slash investing. And don't get me
wrong, unnecessary expenses doesn't mean you will never buy or pay for these things. It just means that when push comes to shove, they do not absolutely need to be included in your monthly budget. Things like going out to dinner with your friends, subscriptions, gym memberships,
fitness classes, hobbies, coffee out, that kind of stuff can be categorized as unnecessary, even if most months you end up paying for them anyway. And again, remember that whatever is
left over in your budget after subtracting your absolute necessary expenses are going to be competing for space. The more of those unnecessary expenses that you're paying for each month, the less that you'll have to go to savings or investments or things like debt repayment.
So make each dollar count in that category. And the best way to get a really clear picture of what your actual necessary versus unnecessary expenses are is to get really good about tracking your own spending and getting a very clear picture of your lifestyle and what it costs to live it This is part of the reason why one of our first tips on this topic was to start with something like a money diary or writing down everything you spend on for a month or so Often when we
setting out a budget for the first time, especially if we really want to cut back or save a lot, we have a tendency to wildly underestimate how much we realistically spend in certain categories each month. And it's much better to make a realistic budget from which you can slowly
start to chip away than to try and radically alter your spending in a way that doesn't match up with your lifestyle where you'll inevitably probably fail at the budget and then in many cases just stop trying altogether. Understanding how much you tend to spend at the grocery store every month
as well as doing a very clear inventory of which of your more regular bills you could probably cut back on versus the ones that need to remain the same is going to be extremely important to getting a realistic budget. For example, you may be someone who uses your cell phone all the time for both
work and personal use. So for you, it's much more important to just go ahead and pay for that more expensive unlimited monthly plan than to try and radically lower your monthly cell phone bill to a point where you constantly end up having to pay overages each month. From a very clear inventory
of your spending and analysis of your lifestyle, you will be able to paint a very clear portrait of unnecessary versus necessary and identify the places in which you can start to make meaningful changes without radically altering your lifestyle or setting yourself up for failure. You don't have
to have an incredibly strict budget in order to get control over your money. Sometimes you're going to spend on frivolous things or make mistakes or buy something that you might regret, and that's okay. What is important for everyone, though, is having a very clear understanding of
what is coming in and what is going out. And it's also okay to experiment with different methods of budgeting so that you can get a feel for what works best for you and what's more sustainable for you in the long term. The power of a budget is in having control over your money. And at the
very least, even if you're currently spending more than you make for various reasons outside of your control, you have a very clear mental picture of what's happening and what needs to happen in order for you to be in the black again.
And again, remember that no matter how little you may be taking in each month, it is never too early to start budgeting and learning these concepts. Because waiting until you're rich to have a budget is like waiting until you're married to start dating.
Don't forget to check out the next episode in our guide to getting good with money for college students. And for all things talking about money, don't forget to check out The Financial Diet here on YouTube or all around the internet.