What Are The Four Walls Of Budgeting?
Budgeting is the best thing you can do for your financial wellness. Whether you’re making six figures or struggling living paycheck-to-paycheck, budgeting will be key to reaching your money goals. It can help keep you from overspending, it can protect you from unexpected expenses, and it can actually give you freedom and permission to spend!
I know that might sound a little crazy, but budgeting isn’t about restriction at all. It’s about prioritizing and permitting yourself to spend certain amounts in certain areas. So, instead of feeling sick to your stomach when you swipe your debit card at the grocery store, you can hand the clerk cash happily, knowing you spent exactly what you should have. While budgeting gives you peace in your day-to-day spending, it also gives you confidence and hope for the future as you get closer to debt freedom and big savings goals. (More on saving money here.)
If that sounds good to you, then we should get to budgeting. :) However, I hear from clients all the time that the idea of budgeting is really overwhelming, and knowing what to prioritize first is confusing and stressful. Or, I hear from clients that they struggle with the idea of budgeting period because their paycheck just barely covers their expenses—or it doesn’t seem like it’s enough at all.
To overcome both of these budgeting obstacles, we first need to understand the concept of “our four walls.” This is a principle established by Dave Ramsey, and it’s a great way to think about your personal finances from a really basic level. If you know what’s included in your four walls, you’ll know how to begin budgeting and where to start goal-setting.
Let’s get into the “four walls” of budgeting:
What Are The Four Walls Of Budgeting?
What’s the Purpose of the Four Walls of Budgeting?
The purpose of the “four walls” is to help you understand what budgeting items must be your top priority. If you’re in a pretty stable financial situation, you’ll use these four walls as the starting point of your budget. You’ll determine how much you need for just those four items, and then whatever is left over is what you’ll use to allocate money for giving, saving, and other spending.
If you’re in an unstable financial situation, we’ll handle this differently. As a financial coach, I use the Dave Ramsey Baby Steps with my clients to help them reach their money goals and have peace with their finances. The baby steps go like this:
Save $1,000 for an emergency fund
Pay off all your debt aside from the house
Save 3-6 months of living expenses
Invest 15% of your income into retirement
Save for your child’s college fund (if applicable)
Pay off your home as early as possible
Build wealth and give
Though many people can start on step one of the baby steps right now, that’s not everyone’s situation. Some of you may not have your four walls secure, so you’ll need to start by getting those things back in order. First, determine if any of these situations are a reality for you:
You’re behind on mortgage or rent payments
You’re in a temporary housing situation
One of your major utilities is turned off or you’re behind on bills
You have no means of personal transportation
If you are in any of the above situations, you’ll need a bare-bones budget that focuses all your resources on getting your four walls secure again as quickly as possible. Once you do that, you can begin the baby steps and make real progress toward your financial future!
Here are the four walls:
What’s Included in the Four Walls?
Food
Feeding you and your family is, of course, an essential budgeting item. Start here! Consider how much you need to allocate to feed your family for a month and make that one of your first line items. And, to be clear, your “food budget” refers to groceries, not eating out, since that is not essential.
Utilities
Utilities get the next chunk of your paycheck. I consider “utilities” anything that keeps your house running. This includes electricity, water, heating, air conditioning, trash services, and a basic phone service plan. Remember that when budgeting utilities some of them change every month based on usage! You’ll have to edit and update the amount you allocate for certain utilities each month.
Extra tip: Call your heating and air companies and ask about a “budget plan” where you pay the same amount every month. This can help planning and budgeting be a bit of a smoother process.
Shelter
Housing comes next. You shouldn’t be spending more than 25% of your monthly income on your apartment or house. If you are, it may be time to move or adjust by adding a roommate. Either way, the shelter gets the next portion of your paycheck. This includes rent or mortgage payments, HOA fees, insurance, and property taxes.
Transportation
The last of the essential “four walls” is basic transportation. What “basic transportation” is for you depends a little on your city and circumstances. For some people, basic transportation could be access to a bus or train system and for many, it’ll be owning and managing a vehicle. So, for the last of the must-have budgeting areas, allocate money for your train ticket, car payment, gas, and routine maintenance.
Extra tip: If you don’t already have a car, say no to car debt payments by paying for your next vehicle in cash. Yes, CASH! The average car payment in Texas is $572 as of 2023. Yikes! That is so much money. Be intentional about saving ahead of time so you can avoid this expensive loan. This will help you get to financial security much faster!
Before you budget anything else, start with your four walls and build up from there!
If this is your first time budgeting or setting money goals, I’m here to help! You can start making smart financial choices today by creating a budget that uses the “four walls” as the foundation. When you know what’s essential, it’s much easier to determine what’s not and establish a responsible budget that’ll first bring you security and then prosperity!
If all this still sounds a little overwhelming, I get it. There can be SO MANY emotions and circumstances wrapped up in finances, especially if you’re really struggling and living paycheck-to-paycheck. So, if you need a more detailed plan, let’s meet for financial coaching! I’d love to look at your situation and help support you on your journey. Until then, browse the blog and start creating your new budget! :)
