There was a time in our lives that my wife and I did not budget. We both worked full-time and there was always money in the bank. My theory at the time was that as long as the bank account had money there was no need to budget. As time passed we grew wiser. Our thinking about budgets and their importance changed.
Here’s what brought about the change:
- We decided that our student loans would not be paid off until we decided to aggressively attack them with payments. We wanted to be more focused on getting completely out of debt.
- Our family moved. The move involved going from one income to two (I went back to school full-time). This resulted in a significant household salary reduction. My wife also continued working on her Master’s Degrees part-time. We had already decided that we would do everything debt-free. Budgeting seemed essential to making the numbers work.
- We attended a Dave Ramsey Live Event. It got us fired up to take charge of our personal finances.
In many ways, budgeting is a trial and error process. I thought I would share what works for us so that you can see if it will work for you.
- We set up a simple Excel document. It is a budget template that I have customized. If you use Excel you can get some simple budget templates from Microsoft.
- All through the week, we keep receipts for everything we buy. If we use the money for something that doesn’t offer a receipt we write it down on the back of one of the receipts. Memories are not good budgeting tools.
- Once a week, Monday nights for us, we take 15-20 minutes to enter all the receipts.
- After entering the receipts we both look over the category totals to see if we are on track and if anything needs to be adjusted.
Here are some suggestions in regards to budgeting:
- If necessary, change the lingo. Some people hate the word ‘budget’. Call it instead of a ‘spending plan’. Budgets are not necessarily about restricting your spending, but instead about helping you spend according to your goals. Budgets tell you where to spend your money and conversely, where not to spend your money.
- Start simple. Budgets can become amazingly complex. For the first couple of months just try and get everything on paper. As you get into the habit of budgeting, then you can perfect the art. Start with only 15 categories for the first month. Then add more as necessary. Keep it simple.
- Incorporate a way to be lazy. We put $10 into our budget called unaccounted. Anything under a dollar we don’t do anything with and assume the $10 will cover it. Your lazy number might need to be more depending on your spending habits.
- Be consistent. If you get behind on entering your receipts, the task only becomes more daunting. Force yourself to do it every week.
- Budget together. When you and your spouse get on the same page financially your relationship will be so much richer (emotionally).