I think the next logical place to go on this blog is to spend a little time pondering the greatly feared monthly budget. In this here house we have experimented with various forms of this over the years, but mostly in non-commital ways that still allow our profligate spending ;). No matter who you are, YOU absolutely need a budget, and you need it right now.
I have found that there are only two ways we actually end up adhering to a budget. One is we pay ourselves first–we have an automatic deduction to a savings account on every pay day, so we never see the money to begin with (we have had to temporarily stop this since our move this summer given the huge increase in rent we are paying, but are planning on starting this again as soon as I get a raise again in July). We also contribute 9% of my income to my retirement account, and are contributing to a lesser degree to an HSA account (which is a super awesome entity we need to talk about later!). Obviously deciding how much you are going to put straight into a savings account can be hard, and this is where our second successful strategy comes into play–some (fairly) painless number crunching.
We sat down a year ago and committed to looking at where our money was going at the end of every month. We got all our accounts loaded up on Mint, and will spend about 30 minutes at the end of the month going through and classifying every expense. I even have an alarm on our family google calendar reminding us both that it’s time, so I don’t have to feel the pressure or burden of broaching what can be a touchy subject. Doing this allowed us to see that we were spending $1100/month on groceries (much of which got thrown out) and $300-400/month on just coffee and snacks out. It provided us with some pretty low hanging fruit to go after when it came to painless cost cutting.
However sometimes knowledge does not equal power. Just knowing we are overspending does not always change our habits. We’ve found that sometimes the only way to actually keep us at our goal of money spent out on coffee or groceries or eating out, for example, is to actually take that amount out in cash for a two week period, and then when it’s gone, it’s gone. We’ve done that at various points throughout our life, and it’s a ruthless (but easy) way to keep yourself limited.
I know there are a billion different ways to budget, including YNAB, Personal Capital, Mint, and good old excel. I’d love to hear if you have a budget, and how you’ve approached managing your monthly finances. What are the areas in your life where you feel like you either spend too much, or just are clueless about how much you’re actually spending? I’d also love to hear from those who feel too intimidated by the idea of a budget, and what I can do to empower you to just get going!
P.S. The photo has nothing to do with this post, except it reminds me of how much finance talk the esquire and I had when she was visiting last weekend.
P.P.S. I also wanted to point out that I am trying very hard to always link to articles written by WOMEN — not that guys don’t have a great perspective or great information, I just really want this space to provide examples of women talking, thinking, and making decisions about their finances.