Physical fitness is all about enduring short-term pains to reach our goals. Day after day, we avoid the carbs and hit the elliptical machines knowing that the benefits are coming: more energy, more strength, less stress.

Financial fitness works the same way. No pain, no gain. But if we manage it properly, we can minimize the pain and maximize the gain! Think of your budget as your workout plan for financial independence – a.k.a. freedom from salaried employment.

By following a financial plan, we can buy back our most precious resource, our time!

That said, “budgeting” does have a restrictive connotation. The last thing we want to do is set goals that are too rigid to maintain. We inevitably fall off the wagon if our budget is too strict. So let’s negotiate the terminology for a psychological fresh start.

Let’s call it a “Living Plan”. It sounds more adaptable, more doable. The goal is to aim for financial independence while remaining flexible enough to respond to life’s hiccups. Together, we’ll build a working draft that you can revisit and revise frequently. This Living Plan can be updated monthly to reflect fluctuating bill payments.

What’s your current state?

Step one is determining your current financial situation. The Current State Chart lists whether or not you are Getting Ahead, Breaking Even, or Falling Behind. Getting Ahead is simply earning more than you’re spending, leaving some money unspent by the end of the month. Breaking Even, of course, means spending the money you bring in, with nothing left at month-end. (To put it optimistically: No debt is incurred.) Lastly, Falling Behind is the use of borrowed funds to spend more money than what was earned.

I added a chart below so you can review the examples for Getting Ahead, Breaking Even, and Falling Behind. Use this chart to complete the “Current State” column with your actual values for each row. The Net Income from your actual values (highlighted below) tells you the current state of your financial situation. A positive value indicates that you are Getting Ahead, a value of $0 indicates that you are Breaking Even, and a negative value indicates that you are Falling Behind.

What’s your financial goal?

Step two is setting goals based on the current state of your financial situation. The purpose of the Goals Chart is to identify areas where you can adjust your spending to match your finance targets. Fill in the empty columns in the goals chart below according to the example of Monthly Income; a Savings Rate to pay yourself first; and target expense amounts for Rent, Utilities, Groceries, Clothing, and Entertainment.

My recommendation for savings is to automatically deduct 10% from your Monthly Income and deposit it into a separate account. Automatic deductions allow you to put aside money for your long-term goals before setting routine expenses. It’s ideal to put aside six times your monthly Expenses Subtotal (see the Current State Chart above) in a separate savings account. Additionally, the remaining available income (in the cell highlighted below) may be added to that same savings account for unexpected expenses. Once you have the recommended savings amount, you can work with a financial advisor to come up with an investment strategy, with financial independence being the finish line.

You want your Living Plan to be straightforward, simple, and easy to follow…after all, it’s your roadmap to spending money.

The initial goal is to create a contingency fund for unexpected expenses (a minimum of six months of expenses). We want to gradually become more dependent on the Living Plan, perhaps integrating it with the process of paying our monthly bills. As we learn to prioritize spending, we can identify more aggressive investments to reach our goals faster. Following this plan for financial independence will give you increased flexibility to decide how you want to spend your time.

*Thank you to first readers: Amy Baily, Justin Faye, Patrick Rapa, and Ryan Thornhill.