Budget. It’s right up there with the word diet. Just the mention of the words makes us feel restricted and somehow less free. This is, of course, an illusion. Everyone has a diet whether it be fast food and candy bars or vegetarian.
Everyone also has a budget. We spend what we earn. If we spend less, we have something to save. If we spend more, we have to use credit. It really is that simple.
The part that can seem complicated is the actual “how-to”. How do we make a budget? How do we decide how much each category gets? And how, with busy schedules, do we find time to sit down with our husbands and actually make it happen?
Here are a few tips to simplify your budget and your financial planning time each week:
1. Have a meeting with your spouse if you are married.
My husband and I believe strongly that no matter who brings in the income, the money is “ours”. That means that aside from some “blow” money we each put in our wallets, we decide together on how to spend the money. For a budget to work, you must both be in agreement. There cannot be any “hidden surprises”. This one tip can keep a lot of the typical money arguments at bay.
You can decide whether you meet once a week, every two weeks or once a month depending on when you get paid. While we sat down together initially to create the budget, we have our weekly budget meetings over e-mail. One of us balances the checkbook, keeps track of what bills need to be paid and what expenses are coming up. The other keeps track of our savings account balances and decides which bills are paid when.
E-mail works best for us because I do this type of “office work” while my husband is at work. He can check his e-mail on his breaks or even when he gets home and reply.
2. Give each dollar a place to go.
Dave Ramsey, common sense financial guru, calls this a “zero-based” budget. We do our best to account for every dollar that comes in and decide ahead of time where it’s going to go. We have found that we cannot maintain too complicated of a system, so we only have about 5 general categories to which we assign our spending money.
The typical argument against a budget is that there won’t be any money for “fun”. As I already mentioned, you can still set aside an amount for you and your spouse that Dave calls “blow money”. This is money that you can each spend however you wish. In our home, mine usually goes to Starbucks and for clothes and “extras”. My husband’s usually goes for fishing or camping supplies. Other than designating a certain amount each week for this purpose, we don’t have to account for this money.
Another argument against a zero-based budget is that you can’t save money. We have a “spending” category called Savings, and we just pay out a designated amount to our savings account.
I can also hear someone say they don’t make enough money to budget. If you have a lower income, you must budget. It is even more imperative to give each dollar a place to go and decide carefully ahead of time where that is. You may have to make your Savings and Blow Money categories non-existent or very small until you can increase income, but you can still decide where your money is going to go.
3. Decide on which system works best for you.
Since I’ve mentioned Dave Ramsey, I will acknowledge that he advises the “envelope system” for spending categories. This literally means to put your budgeted amount in an envelope marked, for example, Groceries. You then spend the cash out of that envelope for that category, but when the money is gone, you are done buying groceries for the week or month.
While the envelope system is a great way to keep track of expenses, it never seems to work well for us. We do the opposite and use our checking account to track expenses. We just put the budget category in the checkbook beside the amount. Then, when we want to see how much we spent that week or month in a certain category, we can just add up the amounts beside that category. We also keep track of how much is left in each category by using a budgeting app on our phones and syncing them.
4. Do not expect perfection.
We were paralyzed for a long time in budgeting by trying to create the “perfect” system. If you are new to the concept of budgeting, know that it will require tweaking often. You may overspend in one category and have to spend less in another. You may have to adjust the amount you budget from month to month. Think of it as a process instead of a destination.
If you are a mom that works from home, you know all about saving and making money. You also know about time management and organizing your schedule. A budget just combines all those strengths and helps you keep control of your finances.
For you, the reader: What budgeting tips would you add to the list?