Budgeting tends to get a bad reputation in our world. I have literally had a friend say to me, “I just don’t want to budget right now in my life! It seems too restrictive!” This could not be further from the truth. My husband and I have been doing a monthly budget for 9+ years now and here is what I can tell you about it: there is freedom and profound joy that comes from budgeting. Because of our budget, we are able to give, save, and spend our money the way WE want to. We don’t have debt collectors or loans hanging over our heads.
Here are my 5 basics for budgeting:
- Start today. It doesn’t have to be perfect, but the sooner you start, the better you’ll get at budgeting. The first 3-6 months are the hardest as you figure out how much to budget for each category, but if you don’t start today, you’ll be one step further from your goals tomorrow.
- Pick a budget software or spreadsheet and revisit it once a month to plug in your monthly numbers. I personally have a Google Sheet that I keep and each month, I revisit it and plug in our numbers for the month. Most of the numbers stay the same, since our mortgage, insurance, food budget, etc. are all fixed expenses, but some numbers vary such as gasoline if we have a road trip coming up or our electric and gas bills for our house depending upon the time of year.
- Give every dollar in your budget a job. That means if you write down all of your expenses and you have $100 leftover, that money needs a job. It can be saved for a future expense, used for a nice dinner out, or given to charity. Regardless of how you decide to use it, give it a job. That will keep you accountable for every dollar. If you finish your budget and you’re in the hole $100, revisit your budget. You may have to cut eating out, those concert tickets you want, or find a way to lower your bills. No matter how you do it, each pay period will end with a zero when all money is allocated.
- Use your budget to pay off debt and/or save for larger purchases. For instance, if you currently have a student loan, credit card debt, or a car payment, that is part of your budget. The more you can budget for that line item, the faster you will pay off your debts. Just think, if you have $500 going toward debt right now and you pay off that debt, there’s $500 freed up to give, save, or invest in other ways! If you are debt free, but know you have a large purchase in the future, maybe a new roof on your house or a new car needed in the next 3-5 years, now is a great time to start allocating money in that direction to eliminate future debt. Just think, if instead of a $500 a month car payment, you can save that $500 a month at 7% interest for 5 years, you’ll have almost $36,000 after 5 years to buy a new car. That’s a nice car! But if you take out a car loan and want to pay $500 a month, you can only afford a car worth just over $24,000 (assuming an average used car 9% interest rate over 60 months). That’s a $12,000 difference in cars, when you save your own money and earn compound interest vs. pay someone else compounding interest.
- Before you buy, check the budget! Recently, there was an AWESOME deal on a TV I had been looking at. I’m talking, I’ve never seen a TV this size priced this low, ever. I was eager and excited about it as I felt I had found a bargain. We didn’t really NEED a TV, but our TV in our living room is over 10 years old. I convinced myself this would be a great purchase. I approached my husband to get his input (thinking he would also be impressed by this bargain). His first question was, “Did we budget for it?” Oof. The answer was no. I did not budget for a new TV because we didn’t really NEED a new TV. So even though it was a great bargain, it wasn’t in our budget, so I passed it up for now. It’s only a great deal if you’re already setting money aside for something and it goes on sale. Otherwise, it’s an impulse buy and will only set you back financially in the long run. Check before you buy!
Once you get the hang of it, budgeting takes 10 minutes a month and brings more focus to your money. Married folks, budget with or allow input from your spouse.
To find out more about the categories we use in our budget, click here.
By the way, did you know you can receive a free downloadable budget template just by subscribing to our email list? Click the link for your free budget.
Let’s do this together!
Cortney
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