Tips for Budgeting Rookies

I spend a lot of time listening to people talk about their financial goals.  At the top of the list are usually paying off debt, saving more money, and preparing for the future.  These are great motivators!  But these alone do not allow for realizing these goals. There’s a very important ingredient.  The dreaded “b” word:  Budget.

My husband, Seth, and I have budgeted since the very beginning of our marriage and continue to be regimented about it to this day, but I understand, we are definitely the exception, not the rule.  We are both just nerdy enough to actually enjoy that process, at least a little.  Still, what has helped us is to think about our budget not as a limiting factor, but as a safety feature.  Seth has used the phrase for almost 15 years now; the budget gives us “freedom within the fence.”  This feels especially true when categories like “personal money” for each spouse are included.  When that is the case, neither partner has to feel guilty when they choose to grab a latte on the way to work, but when the money in the category is gone; it’s gone.

Getting started using a budget can feel daunting.  I have three suggestions to get moving:

1. Utilize your previous month’s statements as a starting point.  In other words, find every means you have used to spend money in the most recent month (including debit cards, credit cards, auto withdrawals, checks, and cash) and write down where it went.  This will give you a good idea of where and how your family has been spending your income.  There are almost always surprises in this step, but being honest with yourselves is the best place to start.

2. Find a budgeting tool that fits your personalities and needs.  For example, we used cash envelopes and spreadsheets for over a decade.  Some people will flourish with a yellow pad and pencil.  There are also tons of online and software options available to streamline the process.  I personally recommend everydollar.com, which works especially well with the premium version added that is linked to your bank account.  It has categories pre-set with room to add more and the premium version has a drag and drop feature to dump transactions easily into their categories and even split transactions if needed.

3. Be patient and committed to the process and the budget itself.  Research and anecdotes seem to tell that it will take about 90 days, or three whole months, for the budget to really reflect your household’s needs and desires.  The first month may feel like a total train wreck.  During the second month, you will be able to fix much of what you didn’t like the first month.  And by the end of the third month you will begin to come into a certain rhythm that will feel comfortable and is manageable.  Make sure you actually make your money do what your budget tells it to do.  That is the only way it will help you reach your goals.

Once your budget is in place, view each month rigidly, but the process itself as fluid.  Meaning, make your money behave according to your guidelines each and every month, but in between months, when there are changes in your lifestyle or bills, allocate for them.  I recommend reviewing the budget each month in an abbreviated way and multiple times a year in a longer meeting with your spouse when you have more significant changes to account for.

The key to staying motivated in this is like any other healthy change you intend to make in your life:  make it a habit.  Find ways that make it easy, not hard, to maintain and then actually do it.  It is easy to let good intentions fall by the wayside if you don’t work hard to develop the habit.  Also, just like with most things in this category, know that it will get easier the more you practice doing it.  And the real motivation will come when you start to see progress on your goals.  Those budget meetings will begin to feel more like pep rallies when you see your debt begin to disappear and the piles of savings grow.

Lastly, don’t go it alone.  If you are married, utilize one another’s strengths to make this process successful.  If you are single, grab an accountability partner you can go to before major purchases or text when you are feeling tempted by an impulse buy.

At the beginning of our budgeting journey we had no savings, over $60k in student loans, and graduate student and entry level income jobs.  Now, we are happy to report that the debt is wiped out, the savings has grown, and we love to help show others how to do the same.  The main contributing factor to our success?  Creating and maintaining a written budget.  Think of it as the blueprint for the financial life you want to build.