Last year, for the first time ever, I created a budget for our family. I know that probably sounds weird, because most of you already do this, but I am not lying when I say it took me three days {3 DAYS!!!!} to hammer out our family budget for the year.
I’ve always been good at keeping a strict grocery and travel budget, but everything else, eh, not so much. I mean, I knew what we’d generally pay for things like housing, utilities, clothing and gas, but I have never actually written out a budget plan for an entire year.
I learned that sticking to a budget is hard…and not in the areas you think. Last year, I decided to limit myself to $100 a month personal spending allowance. I thought that would be super tough, it totally wasn’t, though. Turns out, that’s not the area I was hemorrhaging money {like I had originally thought}.
Instead, it was the passive spending that got me. The utilities for the house…flip on a light, turn up the heat, stuff that you are not immediately shelling out cash for. AND, the stuff that I took as fact, like how much our car insurance and homeowners insurance cost. I needed to be more diligent about shopping around for that stuff…like at least every 6 months to ensure I was getting the best deal.
After a year of a budget, I know that creating one is totally worth it. Monitoring where every.single.penny goes gives me concrete areas that I can trim, cut out, and then use the money for purchases I actually want to make…like paying down my house, or buying a plane ticket to spend a week on the east coast.
By far the hardest part about creating a budget is actually sticking to it.
Here’s how I did it:
Start by tracking every penny you spend. Keep every bill, every receipt and then log it. You can use online budget software or Excel–heck, go old school and do pen and paper. You might be surprised by how much you are actually spending on things. This step is going to take some time, but it means you won’t be arbitrarily assigning amounts to any one category.
Now, assign each purchase into a category. You’ll want the basics: Mortgage/rent, water, sewage, trash, gas, electric, groceries. From there, you’ll have to personalize it. If you want an entertainment budget that is separate from miscellaneous spending, do it. If you want a travel budget, make that a category. You may want to break down car expenses into car payment, car repairs/maintenance, gas, insurance, etc. In fact, I reaaaaaallly recommend breaking everything down into the smallest possible category, so that you can see exactly where your money is going.
Here’s a list of categories to keep in mind {in addition to the ones I’ve already listed}:
- Medical bills
- School expenses
- Prescriptions
- Savings
- Retirement
- Clothing
- Toiletries
- Household repairs
- Homeowners/renters insurance
- Association dues
- Annual subscriptions {newspaper, magazine}
- Television
- Internet
- Gym memberships
- Pet costs {food, vet, grooming, etc.}
After categorizing, and assigning CURRENT spending to each category, you’ll be able to immediately see where you can improve. Here’s the tough part: assigning what you plan to spend versus what you are currently actually spending. This is where I think most people start to sweat. Applying restrictions stinks, plain and simple, but money in has to at least equal money out.
I think the key to sticking to a budget is to balance realistic spending AND saving without over-deprivation. It’s like the whole diet thing–it’s very hard to have self-control when you are genuinely hungry. The same goes for a budget–you have to give yourself a bone–which is why last year, I still got $100 of personal spending.
Once the budget is in place, for the first little bit, use CASH. This will hold you accountable. Set your household bills to auto withdraw each month, though, it’s still SUPER important that you enter those numbers into your tracking log each month, and pay cash for the rest. No money, no spendy. If you are an online shopper, like me, buy yourself monthly gift cards, load money onto a prepaid Visa, or deposit money into your Paypal account.
At some point, you’ll want to find your motivation for setting a budget. Are you over-spending and need to reign it in? Why are you overspending? Do you need to make more money, or you are you trying to pacify yourself with purchases? Maybe you are working toward saving for something? How can you give yourself a constant reminder of the prize? Maybe print out a picture of your travel destination {or whatever the prize} and tape it to your wallet? These are kind of heavy questions, and I will warn you from experience, they get a little uncomfortable.
I don’t know about you, but for me, the goal was to stop wasting money on things that I didn’t need. A lot of that just fell into place when I realized where all of the money was going. My budget became a starting point for ways I could save even further–kind of like a weird little hobby.
Do YOU have a budget? How do you make sure you stick to it?
~Mavis
Kari says
This sounds very Dave Ramsey-ish. Have you taken FPU or read his books? Just curious where your inspiration came from, or if it was all just common sense.
Mavis Butterfield says
I think it’s basic common sense. I’ve never taken FPU but I do listen to his podcasts occasionally. This year with my whole no spend challenge has been awesome. I am constantly asking myself “do I really need this item more than I WANT to move to…? And what is it going to take to do that?” You have be to willing to give up all the silly short term stuff to be able to win/earn the prize. And Kari, I want that prize. 🙂
Kari says
Good for you! I’m currently leading FPU at my church, and this is exactly what I’m trying to drill into the head of everyone. It’s about choices! Keep up the good work!
Carrie says
My grocery spending has been out of control this year. Buying quality produce, dairy and meat gets expensive! I need to start fixing 1-2 low budget meals a week, like rice and beans. I think I’ll try using just cash for grocery, toiletries and pet items (food and treats) and see if that helps. We already keep the house on the warmer side in summer and on the cooler side in winter. We also have gotten a lot better at turning off lights and unplugging electronics which saved us $5 the month after.
Our dream is to buy some land in the NC mountains and build a tiny cabin for weekend getaways and vacation.
Debb says
How to deal with a husband who isn’t on board…..
Brianma says
My husband use to just burn through a paycheck. Money was money and it all needed to be spent. I made a conscious effort to show home the power of saving. I have tried various methods over the past 13 years, but here’s what worked:
I took to saving money from my budget each week (the amount I ‘saved’ on the bottom of a receipt, gasoline pump discounts, free shipping, and anything a store claimed I ‘saved’ shopping there, money I would have spent on something like Starbucks or impulse shopping), then I put it into a savings account opened only for that savings. After 8 months, I added his name onto the account and he saw the amount in it and was shocked. He learned the power of saving and not spending. I even let him put that money into one of his big boys toys as incentive. He didn’t realize the little amounts, $1.00 at vending machine for example, really can add up over time to something significant. This opened up a dialogue and discussion of how he could trim his budget down and maybe save for things he values. Start small and work up, progress is progress and don’t criticize even the smallest efforts. Now my husband comes running to me with receipts and stories about how he saved $0.20/gallon at the pump and to add the $4.00 into that savings account for his 20 gallon purchase. Any excitement about budgeting and saving is awesome. A budget doesn’t mean it needs to all be spent, but the money is allocated for a particular goal/bill/expense, anything left over can be repurposed into another category or put into a savings for a goal. Getting them on board is very difficult, it took me 13 years of patience and different strategies.
Kirsty says
Make sure they always have cash on them – but no access to more.
Have a bill arrive – and when they fuss, say ” I’ll pay it tomorrow, the money is already there “. He was so impressed by this that I’ve been handling our finances ever since.
Go to garage sales to see where stuff ends up
Have a home loan that needs repaying
Rosaleen says
I had to do this for us when we were newlyweds. (Creeping up on a half-cenury ago!) Hubby’s first job after military service netted less than $100 per week. We had a car payment, a personal loan, no credit cards, no furniture, and I was pregnant, living in a strange city. It seems like a LOT of what we learn in school is never used, but I did have one semester of economics as a high school senior. The one thing that stuck out for me was a pie chart for a household budget which showed how to plan what one DID have. It has been a very long time and expenses are skewed from what was written for the 70’s, but I figured something like 30% was what we could spend on housing, 20% for food, etc. We started looking and found a tiny apartment, within the guidelines, planned $20/week for food, including hubby’s cigarettes and laundry detergent, etc. We studied classified ads to find a used hide-a-bed couch that could serve two functions to start off. Things were beyond tight: I counted slices of bread when picking up a loaf, how many slices of bologna we could eat per sandwich to make it last a week, rationed meat, etc. It took me 6 weeks to save up the extra money to buy a second sweater for the baby when he came. BUT, we did it. I could plan things out that strictly again, if I could get hubby on board, and we may go in that direction when he retires. Right now, I just buy what I need (sometimes just want) and make it last. I’ve learned not to be extravagant, so can buy some extras at this point in our lives.
The one thing I strongly disagree about with what most people are suggesting is using credit cards. We get cash back when we use ours, so I try to buy everything I possibly can with one specific card. I had cataract surgery and was offered a discount for paying in full within 30 days, so I did, plus put it on that credit card, over the phone. I got cash back and I saved the cost of postage. When the credit card bill comes in, we will pay in full. I can spend within a limit just as well with a credit card as I do with cash. That is just a matter of discipline, so choosing cash over credit does not make sense to me. If someone else can’t do that, then maybe s/he should stick with cash.
Jill says
I have taught FPU to teens for many years now so I can practically quote Dave Ramsey….ha! In fact, the budget was our topic just this week. I had the kids poll their parents about financial stuff and one of the Qs asks if they have a written budget. I’d say about half do…..so good for you, Mavis! Seeing it in black and white is much different than just keeping it in your head isn’t it? The little, dumb purchases really add up when you see it written down (i.e. Starbucks, or “five bucks” is what Dave calls it!)
When my hubby did the finances he did it more in his head. When I took over, I used Monopoly money to show how much money we were wasting each month on silly things. That really helped him to SEE things more clearly, set some goals, and cut out/down on those impulse purchases. Perhaps asking those resistant husbands HIS goals for your money might help him climb aboard?
Marcia says
I don’t keep a budget. But I probably should.
nikki says
Donations
Also a category for charity or friendly loans (the ones you hope to see repaid but are letting go of our of the good of your heart if that’s not the case) We tried to do a budget without this, but I still spent on these areas, so it became non-negotiable for us!
Gift Giving
Additionally we had to budget for gifts. We are in a large family with a lot of kids and there are a ton of birthdays (and graduations and weddings etc). Add to that the Christmas gift exchange with extended family and it’s a big area of spending. I always told myself I would save money and make gifts or save fun found things for special days and while I can do this sometimes, there’s no way I can keep up with it as easy as sending a gift card or picking up a timeless toy or wished for item.
Childcare
Babysitting. It sometimes costs more than all the rest of the date combined. Totally worth it.
“down side” of a budget? I had a medical issue this same time last year that went on for months and the result was that the family ate a lot of convenience foods. I still know exactly how much was overspent (logged receipts) and that I ‘owe’ back to savings. So I’ve tightened the belt all year and only been able to pay back about half of the deficit… Ignorance would have been bliss.
(At some point it will just be silly and I’ll forgive myself the remaining difference and move on, though…)
Thanks Mavis! You make money management feel cool.
Carla says
Always write a budget- weekly. Do I stick to it? Mostly. Sometimes we go over by a bit, sometimes by a lot, but we try! We’ve been working on a few savings goals (just hit my target 6 months EF!) so we’ve been pretty good! Just posted my weekly budget on my blog today! 🙂
Mable says
What seemed to work with my husband was to start saying, every time he bought something, “Gee, how many hours of your life did you trade to earn the money for _____ (fill in the object). It didn’t take long for him to be horrified and seriously cut back on his spending. This was before we married.
The other thing we did before we married was write down the rules that would govern our marriage. Only four: no name calling or swearing or silent treatment at each other even under the most provoking circumstances; 2) IF we cannot agree on major decisions, the status quo stays in place until we one can convince the other; 3) no loaning money to anyone, not friends and not family. If we see someone in distress and want to help, we GIVE them the money so that it doesn’t damage the relationship if they don’t pay us back, and 4) We each get $100 a month to blow as we see fit, but if we decide to go out to dinner it comes out of this money in one of our pockets. We have been married 33 years and have never broken any of these rules and 2,3, and 4 saved our finances. We kept the $100 limit even when we were both making six figure salaries at the height of our careers (retired now and able to travel 6 months a year because we saved diligently for 30 years) and have never regretted it.
Ande says
Ynab (you need a budget) is an online application that helps you do just this with all the modern technology. It’s a virtual envelope system, and it’s saved our finances. I highly recommend it to save you a lot of time while you save your money.
MRSMARYD says
I HAVE BEEN DOING THIS FOR THE FAMILY SINCE 2012…WHAT I DO IS AFTER PAYCHECKS DROP I MAKE SURE THAT THE MONIES BEING DIRECTLY PULLED IS LEFT SITTING IN THERE, ALL ELSE COMES OUT IN CASH. SOMETIMES THERE MAYBE ONLY CENTS LEFT IN THE ACCOUNT BUT I GOT THAT COVERED! ON MY SPREADSHEET I HAVE LISTED OUT WHAT CASH NEEDS TO BE SPENT IE SAVINGS (NANO ALWAYS SAID PAY YOURSELF FIRST!!) FOOD, PETS, GAS, PERSONAL, LEFT OVER$$ (OR FREE MONEY gets carried over to follow paycheck which then can be used willy nilly or saved AS EXTRA for say a vacation, concert etc)….THIS ALL GETS PD IN CASH, ALL GO INTO ENVELOPES MARK ACCORDINGLY. THE SAVINGS ONCE IT HITS A CERTAIN AMOUNT GOES INTO AN ACCOUNT THAT IS IN DIFFERENT BANK INST. (MAKES FOR TRACKING EASIER FOR ME). CLOTHING, UNLESS A SPECIAL OCCASION IS THRIFT STORE. CHRISTMAS PRESENTS, BIRTHDAYS, ANNIVERSARIES ARE HANDMADE. very very SPECIAL REQUESTS ARE FITTED INTO THE BUDGET (IE ART SUPPLIES, COOKING SUPPLIES ETC.) THE ARTICLE MENTIONED 3 DAYS TO BE DEVELOPED….TRUST ME YOU WILL TWEEK N TWEEK N TWEEK!! LOL it took me about a year TO GET THIS DOWN PAT………..