On Tuesday we delved a bit into some of the uncomfortable moments in my early adulthood. Today we are taking a step back towards the track and discussing something near and dear to my heart, budgeting.
When you have a budget it should not be restrictive, just the opposite, it should give you the freedom to live your life the way you want to. We are all victims to getting caught up in the daily and losing sight of the bigger picture. If you just think of a budget as an outline to achieving your goals maybe that can help motivate you to work on one. 61% of US adults do not even have a budget at all! That is an alarmingly high number considering most people want financial security. The first real tangible step to financial freedom and independence is a budget! Today I will go over the basics of overcoming some of the mental hurdles behind creating a budget and discuss some things I do to help make the budgeting process easier for myself.
Honestly, one of the reasons I shared some of my struggles in the last post was to help people understand where I am coming from. When you are creating a budget just keep in mind it is a personal process, this has to be workable for you. There are tons of great resources out there to help you on this process, and their systems work but that won’t matter if it isn’t something you believe in or can commit to. If you are reading through some of these resources and you feel overwhelmed, take a deep breath, that is totally normal.
To really tackle this process I had to dig deep and figure out why I wanted to have a budget and what my goals were, then my wife and I had to sit down and compare reasons and goals. Next we had to make a plan for the family that aligned with these desires while still living the life we want for our kids. I refuse to do one of those budgets where every dollar goes to paying off debt or saving for a house or etc. Not to say this isn’t a good method and that it doesn’t work for a lot of people, but I can only share with you what I have done. For me the Ramsey method, while effective, was too stringent. I started looking around and discovered the cash envelope method that the budget mom does. I also did not find this method to 100% fit my needs, however the two programs are wildly successful for tons of people, so I looked at my life goals and the guidelines and crafted a mashup of the two.
Now, when you are mentally ready to start this process the real work begins. You need to find a system that works for you, whether it is a proven method or a Frankenstein creation like I did, you need a plan. I started with the following steps before even deciding on a method.
- Listed out all of my income sources/frequency/amounts
- Listed out all of my monthly expenses/dates/amounts
- Listed out all of my debts/balances/minimum payments/interest rates
- Listed out any major expenses upcoming (vacation, moving, etc)
With these listed out it was shocking to see! I did not realize, even though I micromanaged our finances, how much money a month I was throwing away on debt payments. When I reviewed my credit card statements- most of the purchases were impulses. Target runs, eating out, clothing and shoes, etc. My dad always told me if you have to use a credit card to buy it you cannot afford it. I always internally rolled my eyes at that, but in a lot of ways it is true. If I have to put that Starbucks latte or those sale price jeans on my plastic- I cannot afford it. Realizing this helped me along to make some drastic changes in how I viewed my own money and spending habits.
Our priorities are to payoff all of our consumer debt (using the snowball method) while continuing to start/grow my business and maintaining our kids activities. Now any good budget needs some kind of cushion for emergencies I feel. So according to Ramsey we saved up our $1,000 emergency fund. Now for my budget in addition to that we have little savings accounts for things like car repairs, vet bills, and other major annual expenses. Sidebar- why is summer camp so expensive?!?
Once you have it all written down I started to budget by each paycheck, along the lines of The Budget Mom’s system. I found it helpful to also add all of my bills and recurring income into my Google calendar on my color coded system- see picture below.
I have everything in my life in my Google calendar, everything is color coded, so adding in my bills and pay schedules fit seamlessly in. I have budget sheets I keep digitally and a binder for all of my meal planning and shopping that I have paper copies on file as well. For me it makes it easy to know what to do and when and I like taking elements of that emotional and mental labor out of the equation of my life and my household.
What systems do you use to stay organized or keep track of finances?