Permission to Spend - Budgeting 101
When I was in college we had required general education classes such as Traditions, Cultures, Economics, etcetera. My Traditions was a course called “Human and Animal Interrelationships”. Being an agriculture major this seemed like a wise class to take, however, it was not. No offense to the professor, who I still think is amazing person, but it was absolutely useless. I remember having to memorize what dragons like and don’t like to eat (and all this time I thought they were fictional! Oh wait…) My Classics class required 40 pages of reading (twice a week) from pieces such as The Iliad and The Odyssey. These are great social references, but never in my career has knowledge from these poems ever determined my level of success. I wish my university had offered classes like Budgeting 101, Debt-Free Living 402, and Don’t Let Your Finances Destroy Your Marriage 301.
I frequently hear from friends that finances are stressing them out. It breaks me a little inside that our world is struggling so much with something that should be empowering. So, I’ve developed Budgeting 101…. An online guide to start budgeting. Now, I should mention that I am NOT a financial expert, not even CLOSE, but I am married to a financial geek and together we’ve worked to become debt-free and I can say finances are no longer a point of tension in our marriage.
So let’s get started…
Start by tracking three months of spending.
Examine where you are spending your money and create categories and subcategories. Ours looks like this:
The gray category is tithing… a topic for another day. For now, suffice it to say it’s our top priority. The red category are our “four walls”… things we MUST pay no matter what happens in life (mortgage, SRP, utilities, groceries, medical, etcetera). Our orange category are our “must pay unless someone loses their job” items… not super fun to think about, but that’s the honest truth. These include things like the babysitter and our cell phone bill. The green category is made up of expenses that if there were a financial emergency, such as a job loss, we would cut them out of our budget and still be able to function as a household. Blue is savings.
Set a weekly day and time that you and your spouse (if applicable) meet to discuss the budget. It is ESSENTIAL that you both agree on the budget together. This leads to no surprises, no resentment, and no “well you spent this much so now I should get to too”.
Prior to the start of each month sit down and budget EVERY SINGLE DOLLAR you will make. Your outflows should equal your inflow. Unbudgeted dollars only lead to temptation! We like to start with the categories where we know what the cost will be – our mortgage, HOA, internet, car insurance and so forth. Then we move to the areas that we have become pretty good at predicting how much we will spend – groceries, auto gasoline, etcetera. Then we work together to determine the other areas until every dollar has been designated. Don’t leave savings for the end. I repeat. Don’t leave savings for the end.
Tip: While it may seem silly to give yourself an allowance it is SOOO empowering. I think the creation of the allowance category was a turning point in my mindset about budgeting. This is money that every month I don’t have to detail out to Jacob and he doesn’t have to detail out to me. I can get my nails done, grab a coffee, buy some new shoes and not have to feel bad that they are unbudgeted expenses. It’s money that I’m enabled to spend however I please!
This is a hard one. Stop thinking about a budget as a restriction and think about it as an empowerment and a challenge. We like to allow ourselves to eat out every Friday. Instead of, “we can only spend $30 this week on eating out,” we think “we GET to spend $30 this week on eating out.” At the same time, I like to challenge myself to find ways to come in under budget… especially on groceries! I’ve become a pro at knowing which food items are worth the name brand and which can be store brand. (Umm… the Target brand of Wheat Thins, which are hysterically named Thin Wheats, only cost $1 and taste the exact same and there are sooooo many more in the box!) When we come in under budget we are so proud of ourselves that it’s ridiculous.
Reward yourself along the way. If you’ve set a savings goal, make sure you find some way to reward yourself when you reach it. When we paid off our truck we rewarded ourselves with a weekend getaway to Flagstaff. Budgeting is also about finding ways to ENJOY your money.
Don’t get down on yourself if you go over in ONE or TWO categories. Budgeting is a guideline to help you track your spending. Going over in a category or two doesn’t have to be the end of the world, but it should mean that you take a harder look at those categories when budgeting for future months. (For me this comes in to play when buying diapers. Occasionally Target has this super awesome deal where if you spend $100 on baby supplies they’ll give you a $20 gift card, rather than miss this opportunity because it would push me over the “Groceries and Necessities” budget, I take the deal and lower the budgeted amount for the category in future months). It’s all about give and take and about KNOWING where your money is going.
Umm… I’m just going to mention this one again. BUDGET WITH YOUR SPOUSE. Set agreed upon amounts for each category. Respect your spouse by staying within the boundaries. Also, be generous. The other day I needed something but it wasn’t in the budget. Jacob said not to worry about it, but I did. When I came down to breakfast there sat Jacob’s allowance money under my plate. Knowing that I was the priority over the money made our relationship stronger.
If you find that your debit and credit cards make it easy to overspend, try the envelope system.
Don’t eat the elephant. Start small. Set small goals, work towards them, celebrate when you achieve them. Dave Ramsey’s baby steps are a great guide.
Know why you budget. When Jacob and I were DINKS (double income no kids) budgeting felt unnecessary to me. We had more than enough money to pay the bills and have lots of fun. When Jacob wanted to budget I’d almost roll my eyes. When we were in the process of buying our house he finally sat me down. “If we save X amount before we move in and apply it to our down payment our mortgage will be this. If we don’t save X amount before we move in our mortgage will be this.” I was a deer in the headlights. The amounts were drasticly different. Saving beforehand meant financial peace later. It suddenly became worth it and we set a HAG (harry audacious goal). I’m proud to say we slapped that HAG in the face and ended up with the lower mortgage. After that goal was met we set others… paying off vehicles, saving for a new vehicle, saving for land. We always know WHY we are budgeting and that makes it easier.
Give yourself, and your spouse, grace as you begin the budgeting process. It’s amazing that Jacob didn’t lose his mind with me when we first married. My budgeting was the Oh Crap Method. It took about two and half years for me to fully get on board and understand the importance of budgeting.
If you’re still left with questions about budgeting I suggest listening to Dave Ramsey, attending Financial Peace University, and talking with friends and family who are debt-free. Please stop seeking advice from friends who are also not in good financial standing. I don’t say that to be rude, but it’s like asking someone who is failing math to help you with the class.
You’ve got this!
