Budgeting is one of those things that I know a lot of us struggle with. Most of us were never taught or shown how to budget. Couple that with living an incredibly consumerist society and it’s a recipe for inevitable disaster. We struggle to make ends meet and still have items in the back of the pantry that never get touched. There needs to be a balance. Do you have to stay in debt? Do you have to give up everything to stay out of debt? I think there should be a middle ground. If you are in a relationship, it will take all parties to agree to budgeting and sticking to it. Don’t expect overnight miraculous changes, though. It is a process and may take some time, depending on how aggressive you want to be.
Before I get too far into it, I want you to know what you’re in for: it takes work on your part; it might not be easy; initially it will be a bit of legwork but it will get easier; every family will have different solutions. You’re gonna want a piece of paper and a pencil for this. It’s going to require some thought.
First, write down what you bring in a month, after taxes and that sort of thing. Like the amount that actually goes into your checking account. Second, make a list of necessary bills. Like the ones where they must be paid or you’ll lose your job. This would include rent/mortgage, electric, water, sewer, heating fuel, food, bathroom supplies like shampoo and toilet paper, medications. Now write down the next most important, the ones that would cause hardship without them, but not impossible to live without. This includes gas for your vehicle, phone, laundry money, insurances, credit cards, storage unit, auto loan, pet food or supplies, diapers. Now write down the entertainment stuff. Netflix, movie rentals, Amazon, eating out, alcohol (yes, this includes wine), cigarettes, energy drinks, coffee stand espressos.
Did I miss anything? Write it down. You might want to give this a day or two of thought. Anything, and I do mean anything, that you spend money on, write it down. If you aren’t sure how much you spend, then take one or two months and save every single receipt. Every one. Whether it’s $2 or $200. This is a hands-on simple way to see exactly where the money goes.
Okay, so let’s explore what the purpose of your budgeting is. Either you are just looking to not overspend but not really looking to change anything or perhaps you’d like to track your spending over time to see where the money really goes or you are looking to trim back and perhaps stay out of or get out of debt.
Now that we’ve established that, let’s look at that list. What can you do without? Either temporarily or maybe forever. What are you willing to “give up” or as like to I think of it, free yourself from, in order to make the changes you want to see? Circle the things you want to cut back spending on and cross out the ones you want to get rid of.
When you add up all the money that goes out, how does it compare to the money coming in? Is it pretty much even? Or is the output more than the input? (That would mean you are spending on credit, adding to your debt.) Let’s say you spend just $20 more a month than actually comes in. That’s pretty easy. Simply drop $20 worth of spending on one of the unnecessary bills. But it’s probably more, am I right? It might not simply be cutting out Netflix to get that amount down. It might mean you have to cut out all the entertainment. But what kind of living is that? You want some sort of entertainment, correct?
So, how can you cut spending? Maybe take the bus to work instead of driving. Or carpool. Or lower your grocery bill. Or quit smoking. Or don’t buy your kid (or dog) that new toy. Or don’t buy that pair of shoes. Drink one bottle of wine a week instead of two. Use less water, thereby lowering your water and sewer bills. Perhaps move from a more expensive apartment to smaller, cheaper one. Try to think outside of your comfort zone.
As I’ve counseled people over the years about budgeting and being frugal, the number one way I hear you wanting to cut your bills is through groceries, eating out, and everyday items like toilet paper or diapers. In lieu of that, that’s what I’m going to concentrate on in a future post. We’ll talk about budgeting your time and resources. Getting more bang for your buck. I’m not talking about couponing, but I am talking about making better buying decisions all the way around.
You might not be as extreme or OCD about things as I am about budgeting. And I’m not the most extreme person about it. But we do have a budget and we do stick to it. I personally have a couple spreadsheets that I use for budgeting. It took some time to set up at first, but then all the info is in there and it makes reassessing those finances and analyzing what changes we can make a lot easier at the drop of a hat. If my husband asks me if we can afford something or other, it’s pretty easy to look and see where I can rearrange things, if need be. Maybe you don’t want to use a spreadsheet, but I recommend writing it down. Tape it to your fridge or have it in your wallet or checkbook.
In our house, Mr. Open Sky gets paid every two weeks, roughly twice a month. This means I break down our bills according to due date and when we get paid. I break up the bills in half. For instance, let us assume for easy math that we bring in $2,000 a month and we have $2,000 worth of bills. That’s $1,000 a paycheck and so I break up all the bills into two sets. Some bills I split in two, like groceries and gas. That way each paycheck has an allotment for food and for gas. Here’s a made up budget for an example:
The best advice at this point is: stick with it. Don’t go over. If you have $15 extra that you didn’t spend on gas at the end of the pay period, put that towards a credit card or your mortgage. Right then and there. Don’t hold it. Don’t waste it. Get this mindset: every dollar counts.
Next time I will be talking about some ways to save money on groceries and everyday items like toilet paper and shampoo. Hope to see you there!