2 easy ways to budget
Updated: May 7, 2019
Why do you avoid budgeting? Are you afraid to set expectations you can't trust yourself to accomplish? Does it seem like too much work? Is there shame involved? It's a common problem: we make money, we make more money, and yet regardless of income level we feel like we live paycheck to paycheck. I call this the "there's money in my bank account, so I can spend it, right?" syndrome.
The first step in creating a budget that is realistic for you and your family is to START. This post outlines 2 simple ways to look at your spending, from the front, or from the back. You don't need a fancy excel spreadsheet with 437 lines of data, and you don't need some fancy template from the internet that looks great but is super confusing. Don't avoid your spending or pretend it isn't there, take control of it!
1. Budget from the Front
Start with a list of big ticket items like rent/mortgage, bills (electrical, water, internet, etc.), student loans or debt payments, and groceries. Think of these items as necessary. You need shelter, water, food, and (let's face it) internet to survive. And most debt is not your friend. Once you shop these big ticket items around for best pricing, they can be averaged throughout the year to start the framework of your budget.
If your total paycheck is $2,000 a month, this is why money feels really tight, and it feels worse if you have lingering debt. Some ideas: get a roommate, shower with a friend :), or buy in bulk. If you are an independent gal (or guy) and don't want to have to share with anyone, you have $375 total for discretionary spending. You have to decide what's most important to you and enjoy spending your money on that. Maybe it's clothes one month, and eating out the next. PS - I really want you to save, so maybe you spend $200 of your discretionary spending, and save the remaining $175/month - wishful thinking!
2. Budget from the Back
This is my preferred method. I know what my big ticket items are, but I put the rest of my spending on a credit card (and pay it off every month btw). Fortunately, most credit cards let you export your spending throughout the year. Most will even categorize items for you (though if you buy everything on Amazon, you might want to classify this spending individually). I do this once a year, but I'll do the exercise more often if I feel like I don't have a great grasp on how my spending is going. Look at what you did so that you can plan for what you should do in the future.
Did you buy too many books on personal finance? (Yes, I did and always do)
Did you spend too much money on fast food? Quit that, it isn't good for you!
Did you buy 7 pairs of jeans, all of which almost fit, but will definitely fit once you lose that last 5 pounds? (No, just me?)
Look for patterns in your spending. Being aware can help you mentally curb your overspending habits. A big warning about budgeting from the back, however. Looking at spending in December 2019 doesn't give you permission to go crazy for the whole year knowing you will look at it eventually. Be mindful and don't be dumb. Yes, you know what being dumb looks like. This is your money, and your hard work. Honor it!
Here are some ways to tilt the scales...
Go ahead and call me #captainobvious, but I'm gonna say it again. Your financial security ultimately comes down to two things - money in, and money out. If you spend less than you bring in each month, for heaven's sake SAVE IT. Don't budget for how much money you might have 20 years from now. Don't assume money will work itself out unless you have a clear vision and specific metrics for how to grow your wealth.
If you want to spend more right now, find a side hustle, participate in a garage sale, or get a second job.
If you don't feel like piling anything else on, you have to spend less. Be patient, if you do good work, and let yourself be seen, your income will rise.