Budgeting. It’s the four letter word of personal finance. I meet with people all the time who are excited to get their finances under control until I say the word “budget”. They nod along in agreement that having a written budget is important but then won’t implement one.
I think a big problem is that people get stuck in the details and then feel like they are doing it wrong. So here are some tips for easier budgeting.
Keep it Simple
Details are good but only to a point. It’s ok to have a few broad categories in your budget rather than a million tiny ones. I see budgets online that are overwhelming. Do you really need to budget separately for windshield wipers and oil changes? No, a category for “car” is fine. You also don’t need to have different categories for paper goods you buy at the grocery store, pet food, and groceries. Counting that all as groceries is fine. Consolidate your categories for easier budgeting.
If you are having trouble with a particular category then you might want to break it out a little more to see where the problem is. Let’s say you have a “food” category that counts all food and you keep going over budget every month. You might want to break that up into groceries and eating out to see if you can spot where you are blowing the budget.
Round to the Nearest Dollar
Again with the details. I’ve used whole dollar amounts for my budget for over 15 years and have never had a problem. If my gas was $50.17 it’s going into the budget as $50. If my fast food order was $7.83 it’s going into the budget as $8. It’s a budget, not a check register.
Also, if you have a receipt that has two categories on it, say clothing and a gift, it’s ok to fudge the tax. Split it evenly or put it all to one category, it doesn’t matter. The point is that all money spent gets tabulated. Let’s get calculators out of budgets!
Have Some “Blow” Money
Everyone needs a little money to spend without the watchful eyes of their budget. That’s totally fine, just plan for it! My husband and I each have our own category with our “allowance” amount. My husband takes his in cash at the start of each month and we mark his whole amount as spent in the budget, then he is free to spend his cash without ever having to track it. I leave mine in the budget and track my spending with receipts. But it’s our money to spend on ourselves.
Make sure to discuss what this money is to be used for with your spouse. For example, my husband and I are expected to buy our own clothes with our blow money. If we eat out separately then it comes out of our personal money but if we eat out together then it comes out of the budget. If I buy a friend a birthday gift it comes out of my money but if I buy a family member a gift it comes out of the budget. I don’t know why it’s this way, but that’s how we work it. Those little issues will come up along the way as to what counts as “family money” and what counts as “personal money”. You’ll figure it all out over time. There are no right or wrong answers.
Do it Daily
This one is HUGE. Tracking your spending with a budget takes only a few minutes a day, but if you let it go a few days without attention then the job starts to feel overwhelming. Do not let this happen! Get into the habit of sitting down each day and spending a few minutes (literally) to record that day’s purchases.
Do you keep a budget? What are your easy budgeting tips? What budgeting issues do you struggle with?
Once your budgeting is working you can consider saving. Check out CD Rates.