Today we have Emily from the Bloom here to share some of her tips about basic budgeting. Bloom is one of the loveliest blogs in the whole blog-world, a comfy-but-real blog where you can feel at home and yet still feel like a better person for having visited that day. Anyway, enough of my speech... Read Emily's post below and then hop on over to Bloom and have a look around. :)
Hi friends! Emily of Bloom here to share some (hopefully!) helpful tips about the basics of budgeting. Thanks to Lorene for inviting me to be part of the Housewife MacGyver series - what a helpful compilation of tips!
First, let's talk about what budgeting isn't:
Budgeting isn't about eating generic brand pasta sauce and buying your shoes at Rite-Aid. It's not about deprivation or restraint. It's about aligning your spending with your values and meeting your goals. It is deciding ahead of time how you will spend your money as opposed to wondering where it all went after the fact.
Like dieting, or getting organized, or any other personal change - the hardest part is getting started and creating a plan that you can stick to. Here are a few tips to help you in your efforts to create and maintain a budget:
* First, stop making excuses. Even if you're very busy and have a variable income and failed your college accounting course, you can still live on a budget. And you should.
* Before you commit to any kind of formal budget, just track your expenses for a few weeks. Save receipts. Write down your outflows. See how much you're actually spending on things like groceries, eating out, clothing, gas. Get cozy with your purchases again - heighten your awareness of the outflows.
* With this awareness you are better prepared to sit down at the beginning of a month and plan ahead. You know about what you've been spending on food, utilities, clothing. You know what's typical in your household. You can project, with decent accuracy, what your expenses will be for the coming month. You may also begin to see some leaky spots in your financial ship that you can plug up.
* Find a system that works for you. Mint.com is a free online option. We use (and love) a budgeting software called YNAB - YouNeedABudget. (More about why we love YNAB here.)
* Sometimes it's necessary to take drastic measures to dig out of a bad financial situation (pay off consumer debt or medical bills, recover from an unexpected car repair, etc.) If you're buried beneath something stifling, you may want to consider taking a few drastic measures to regain some financial ground -- cancel the cable. Sell some things on e-bay. Don't eat out for two weeks. But generally, you'll keep spending as you've been spending, so don't expect unreasonable things from yourself when you start to budget.
I'll give you an example:
Well, we've been spending $600/mo. on groceries, but i know i can be more careful, you think to yourself. I'll only budget $500. Unlikely! Be realistic. Unless you're willing to go to drastic measures, your patterns and habits will pretty much stay the same.
* Do everything you can to build an emergency fund. It's so frustrating to feel like your budgeting efforts are derailed every time an unexpected expense arises. Set aside whatever excess you can to prepare for things like home and car repairs, unexpected travel expenses, dental or medical bills. You'll be able to move forward with your budget with greater confidence and momentum when you can take some of those unexpected expenses in stride.
* Open up very clear and safe lines of communication about money with your spouse. You need full buy-in and cooperation from both parties. Each of you should make the other feel safe to express their concerns, needs, and desires surrounding money and your household finances.
Another budget-saver in our marriage has been that my husband and I each have a "fun fund" - a certain amount of money that we don't have to account for in the budget. We track the outflows for overall cash-flow management, but we don't have to explain our purchases or justify them in any way. We have complete autonomy over our "fun funds." I could spend my whole month's worth on cotton candy and ring pops and my husband couldn't say boo about it.
* I've said this before, but I absolutely believe it, so I'll say it again. Some things get easier as you make more money. Other things do not. No matter your income level, I encourage you to do two things: save and give. Pay yourself first, even if it's only $10/month. Make this your very first budget category, set some money aside for your savings and make the rest of your budget work around it. Get in the habit of living on less than you earn.
Make your second category some sort of charitable giving. Even if your means are very tight, find a way to share. I think this helps detach us from our money and reminds us that it is really only stewardship that we have over our resources, not ownership. When we remember our obligation to help others we are less concerned about how much we can obtain or how fashionable and cutting edge we can appear.
* And finally, change your mind about budgeting. Real change starts in your thoughts. If you continue to think of your budget as a restrictive kill-joy, you'll always resent it and you won't keep with it. Think of it as a means to freedom. The budget is on your team, helping you meet your goals and spend your money in ways that will really bring you the most satisfaction and joy.
This is a topic I've written about extensively at Bloom, you may want to check out the following articles for more details on some of these suggestions and also for some practical ways to save on household expenses:
:: eat healthy on a budget
:: the nitty gritty of getting started
:: budget myth busters
Thanks again for letting me share in your fun little corner of the blogosphere :) Feel free to leave questions in the comment thread - I'd be happy to answer them!
Thanks, Emily! And don't forget to go see more from Emily and Anne, her bloggy other-half (who just had an adorable baby boy!), at Bloom. Be sure to check out their Friday Forum topics -- my favorite day of the week, both in life and over at Bloom. :)
Click here to learn more and see all the previous Housewife MacGyver posts.