I was going to start this post as a tools for budgeting post, but I realized that in order to address the tools, we have to have a budget in place.
The word “budget” seems like a dirty word for many. But the fact is, following a budget is like starting an exercise plan (I’ve mentioned the correlation between financial health and physical health before). It sort of sucks at first, but once you get the hang of it, it becomes routine and makes a lot of other areas of your life less stressful. It’s not saying you can’t spend money, it’s just making sure that at the end of the week/month/year you don’t sit back and go “Wait, I spent HOW much money?”
I also 100% believe that our budget has strengthened our marriage, if not saved it. With two people sharing a future, money can become a huge road block or a great source for celebration between two people. We RARELY fight about money, but we have had many moments of celebration and triumph together when we meet or exceed a financial goal.
Some questions I have gotten from a LOT of people since I have started talking about our Dave Ramsey Adventure: How do you start a budget? How do you know how much to budget for each category? How do you keep track of the money you’re spending? What if you go over what you thought you’d spend?
Let’s start with the basics. Our first step when we knew Keaton was going back to school and we were forced to combine finances was to spend one month writing out everything we spent money on. If we grabbed a 99 cent coffee at QuikTrip, we wrote it down. If I bought tampons, I wrote it down. If Keaton bought a card pack on FIFA, he wrote it down. You get the point. Every cent spent was tracked (without inhibition, we put no limits on the spending this month). This gave us an idea of how much we were spending in each area, and let us know where we REALLY needed to cut back (aka eating out, beer runs, and Trader Joes goodies).
Next, we sat down with this form and wrote out what we planned to spend on each category. For anyone with an irregular income, there is also a form for that! Since we were sort of starting from scratch with me starting a new job, we didn’t have much in the bank already to allocate.
However, if you’re starting with a bit of money already in the bank I’d say this: portion out the money to make sure you’ve got all of your imminent bills covered, then start to divide the rest of it towards your emergency fund (if you’re on Baby Step 1), and the rest of your bills for the month.
Then we divided our monthly bills between my biweekly checks. So I knew every two weeks I would put x amount of dollars into each category. We used pen and paper at first to allow for lots of scratching out and erasing :).
Another system I highly recommend is the envelope system. We used a coupon organizer from the dollar store, and had a tab for each bill we paid cash for. Groceries, oil changes, hair cuts, clothing, etc. We would go the Friday or Saturday the week I got paid and pull the set amount of cash from the bank, then sit down and divvy it up. Sounds tedious, but it truly only took 20 minutes or so if we swung by the bank to or from work.
Wanna make sure you stick to your grocery budget? Leave your debit card at home and take only cash. You will find out how easy it is to stick to your budget when you don’t want to be at the checkout without enough money to pay your grocery bill. Seriously, I did this. I also taped a sticky note to my debit card that said ONLY FOR USE WHEN BUYING ___. That way, I still had to embarrass myself if I wanted to untape the sticky note and use it at a busy register to purchase something I didn’t have cash for.
Personally, no matter when my bills are individually due, we set all of the money to be ready in our account by the first of the month. This is just MUCH easier on my brain. The money will just be sitting there waiting regardless, and sometimes I pay bills early if that’s an option as well. Otherwise, I just pay them as soon as I get the e-bill from the utility company or student loan service. If I sign up for a new service and get the option to pick a date, I always choose the first of the month.
The last tip I have for today is to remember that your budget will not stay the same forever. I am not the best at sitting down monthly and re-writing the whole thing, but it is a good idea to evaluate the different expenses you’re expecting to adjust where your money is going. Also, if your income changes (mine does every 13 weeks with a new assignment), then it is definitely time to sit down and re-write the budget.