Alright everyone. Time to talk money.
Have you ever found yourself setting up a budget, only to waiver away and give it up after a month? The reason was probably from feeling too restricted.
It's true, budgeting can definitely feel like you're on a short leash, when you really want no leash at all. Sounds kind of like a diet, doesn't it? Haha... failing after a month (or a week) of restriction definitely sounds like a diet to me!
Not to mention trying to stick to a budget as a married couple, or with a few kids tacked on. It's not an easy subject, and usually becomes a cause of tension between spouses. Before we got married, someone once said to me, "There are three things everyone fights about in marriage: Religion, Sex, and Finances." (Go read my post on marriage being spoken of negatively and why we should fight back). I remember scoffing at that "fact"... and I still scoff at it. BUT I will admit that we've argued about one of those three on more than one occasion over the years: finances.
It usually goes like this: One of you will have an idea of how your money should be spent and saved, and the other will have a totally different view. These thoughts are usually never brought up until that "budgeting night," so everyone suddenly feels thrown off-guard about it, which is why things get a little dicey. We try to re-imagine our budget every 6 months or so, and in the past it's always a "he-said, she-said" battle and ends up being full of snappy voices and eye-rolls.
So the last time we sat down to do our budget, we turned it into a DATE. We bought wine and cheese, and set the table. First we enjoyed our food while talking lightly about some ideas or expectations we each had for our money. Then, we set our food aside and started to hash out all the logistics. We calculated how much is going in and coming out each month (down to the cent) and then went over what budgets we're struggling to stick to and how we can hold ourselves to better standards. Honestly, the HOW is the biggest issue. How do you hold yourself accountable to a budget when the swipe of a card and mishandling of receipts to track are not kept up with? How do you handle those unexpected expenses like a drink after work with your colleagues, or a hostess gift for that party you got invited to?
Well, it was questions like these that got us thinking about our money a little more seriously. No matter how much or how little we had, we wanted to become pros with our finances and put the bickering behind us. And so, I'm going to share with you our best tips, tools, and ideas to make your budgeting as painless as possible.
1. Give budgeting a positive connotation.
As I mentioned before, lighten the mood by making it romantic, funny, or simply light-hearted. Start the process with an open mind, kind voice tone, and a glass of wine. You could also try setting up some serious ground rules before you bring up the topic (ex: no raising your voice, eye-rolling, blaming, etc..).
2. Calculate exactly how much is coming in.
Once you're ready to get down to business, figure out how much you're bringing in each month. Make sure you leave out reimbursements that come in your paychecks, as well as any income that's not as steady or guaranteed (like a freelance client here or there).
3. Calculate your absolute expenses.
By absolute, I mean: mortgage/rent, utilities (figure out the averages), car payments, home/auto insurance, phone bills, credit card payments, student loans, and so on. Take note of what time of month these items are deducted and see if the first half of the month is getting hit harder than the second half or vise versa. Maybe it would be good for you to move some transfers to later or sooner in the month to spread them out.
Minus these items from your monthly income.
4. Create budget categories.
Before you start adding amounts to any of your categories, go over your needs. Clothing, gas, entertainment, food, car maintenance, tithing, non-food items, decor, etc...
Then look over your transactions over a couple of months and see how much you're currently spending in each area. An important one for us that we recently added, was "social spending." This is spending that is often times unavoidable because of a social situation. Like going out for a drink with your colleagues after work, or needing a hostess gift for an upcoming party. They're the things that don't necessarily fall under "food" or "entertainment" and since adopting this new budget, we've seen less stress on our finances.
5. Create an amount for each budget after looking over problem areas.
Make it fair!
We discovered that a problem area for us is food. We always, ALWAYS overspend on food. We were spending a surprising amount on eating out each week, and it was messing with our finances more than we thought. So we chose an amount that wouldn't stretch us too thin, but also curbed it from getting out of hand. We did this in each category and it's been working very well. I have a decor budget each month, which I can choose not to spend in order to "save up" for something bigger later on.
The thing about budgets, is that when used properly, they give you more freedom than if you spent your money on a whim. So don't look at budgeting as a restriction or a repercussion of being bad with your money, but as a way to be smart and ultra responsible. Don't worry about keeping up with anyone else because you have to do what's best for you.
Then, minus your budget amounts from your monthly income.
6. Find resolutions to budgets you have a history with failing at.
For example... to remedy the food problem in a way that forces us to be more accountable, we get cash out for our food budget each Sunday. We have only that amount to use on eating out or groceries. If we meal plan well enough, we can save a little each week to roll over into a nice dinner out every now and then. Sometimes we go out to eat before grocery shopping and we have to deal with a smaller grocery budget. It really forces you to think before you buy. Sometimes we say no to dinners out with friends so that we can stay on budget (or we use entertainment or social spending)... it's difficult, but again, worth it.
7. When to use cash, credit, or debit?
I'll use us as an example and explain how we use each of these methods.
Credit: reimbursable work expenses, gas, and decor. This works well because our card gains sky-miles. Gas is inevitable, and decor is very "set" and I never overspend, so putting these items on a credit card will never get out of hand. We pay it off at the end of each month.
Debit: bills. Anything that needs bank info or needs to be paid for upfront gets the ol' debit.
Cash: Groceries, social spending, car maintenance, clothing, entertainment. All of those areas were causing trouble in over spending. We pull the amounts out in cash and store them in an accordion file. We can build up the amounts if they don't get used one month, and if we do use them, we always communicate it.
Other: Non-food. We realized I was getting all our non-food (toilet paper, toothpaste, cleaning items, make-up, soaps...) from Target and saving 5% with my RedCard. So the RedCard is strictly for those items and sometimes clothing, as long as it's purchased in separate orders for the sake of keeping track of the respective budgets.
I'm no financial advisor, so if you use your cards/cash differently, and find that you can stick to budgets without a problem, more power to ya - this just happens to work best for us!
8. After answering "how," ask yourself "why?"
Why is budgeting important to you? Is it because you're saving for something major? Simply because you want to be super intentional with every dollar you spend? Are you paying off serious debt?
Once you answer "why," you'll find that keeping that answer in mind will help you stay accountable. We're being very strict with our budgets because we're saving for a kitchen remodel. Our "why" has stopped us from purchasing numerous frivolities over the last several months (like a new TV sound system, a $180 coat, a redundant trip, and a camera). It's hard when you feel like others are expecting you to dish out money because they are, or because it seems like you have to be charitable all the time, but if you're working those things into your budget already, anything beyond that shouldn't have to be debated and you should be able to rest easy.
Here are some tools we use to accomplish all of this:
Mint.com - You safely connect all your accounts (bank, credit cards, student loans, car loans, etc..) and you can see all your transactions and allocate your money to the right budgets. It's very easy to use and straight forward. We like to use it to see our budgets in a more visual way. Plus, on a totally random note, I sat next to the CEO's mother-in-law on a plane once, and we talked the whole flight. She was very sweet!
Google Sheets - Basically a sharable/cloud version of Excel. We have our own system for organizing this spreadsheet, but it lets us see what time of month certain bills come out, when things get transferred, how much our savings has grown, etc.. It think this is one that needs to be organized on a person by person basis.
Digit - "Every few days, Digit checks your spending habits and removes a few dollars from your checking account if you can afford it. Easily withdraw your money any time, quickly and with no fees." We used this tool for a while, until we decided we could just save bits and pieces ourselves and not mess with our money be moved to yet another electronic place. Good for people who just can't seem to start saving. It gets you in a habit without even realizing it.
Cash jar - Each of us comes across random cash here and there. Usually from freelancing, babysitting, selling items, etc... and all of that goes into a jar for a rainy day. We used some of it to pay for Christmas decorations (since we didn't have a budget for that), but the rest will probably be used for our trip up north to help with the extra expenses of travel and eating out. It's not much, but it helps our budgets from getting too dented.
Adulting is hard work, guys! Our budgeting secrets will most certainly adapt as the years pass and our income changes. For now though, these easy steps have helped us stay strong in the face of wanting or pressure to spend. The best thing to keep in mind: do what's best for you and your finances and don't compare yourself with others or try to keep up - they do what's best for them and that's okay!
What do you do to budget? Also, thanks for making it to the bottom of this post, I know it was years long!