Budgeting is…not my favorite thing. It may be one of my least favorite things. Why would I want to budget? Why would I want to limit myself in how I spend my money? It’s annoying. It’s restricting. It doesn’t give me the freedom to buy what I want, when I want it.
BUT….it’s very important. And very valuable. For many, many reasons. I am sure that anyone who has budgeted and spent their money wisely would never say that they regret it. How can you go wrong? Saving and spending your money in a smart and responsible way is a huge way to relieve stress. It can also teach us what is truly important in life. Is it easy? Not for most. And definitely not in a society such as ours which is constantly assaulting us with ads telling us what to buy, how much to buy, that what we have isn’t good enough, that a used car isn’t as great as a brand new one, etc. It can be quite hard to budget when the world around us is telling us to “Buy, buy, buy!”
[Here is a great blog about how to think differently in a consumer-driven world.]
I think most people use the new year as a time to start fresh with their finances, and first on their list is attacking the credit card balances that have built up over the holiday season. My husband and I started looking closely at our finances last month right before the holidays and decided that January was the time that we were going to start doing some serious budgeting. December was our last month to spend freely. We didn’t go crazy, but we didn’t stress TOO much over what we spent. Now, the real discipline starts. I’m feeling pretty good about it so far, since I didn’t spend any money yesterday! But it is only January 2nd, so obviously I have many more days to conquer:P
For any of you reading this who are thinking about how you also need to budget and get your finances under control, here are some ideas for you. (My husband and I are big Dave Ramsey fans, and enjoy listening to his radio show/podcasts. He gives great financial advice that anyone can gain from. So, a lot of our practices come from him, as well as wise friends and family who have taught us some valuable financial lessons over the way. And of course, we have learned a lot from our own financial successes and failures).
1) Take a close look at your expenses. Create an excel sheet indicating your income and your necessary expenses (food, rent, utilities, other bills). These are the things you need to live day to day life. I realize this may look different for everyone, as we all can define the word “need” differently, depending on our individual situations. But remember that the basic human needs are food, shelter, and water. So, focus on those things.
2) Create a budget. Mint.com is great place to start. An Excel sheet that you update frequently will work as well. Try to stick to it! Mint.com is great if you have a smart phone, since you can download the app and it will send you alerts when you are close to going over your budget.
3) Consider your luxuries. Make a list of the things you don’t necessarily need, but really want to make room for in your budget. Prioritize these things accordingly. Decide what you want to keep, and what you can live without for a few months (ie – the daily latte can put maybe $25 a week back in your pocket that you can use towards another luxury you’d rather indulge or a bill that is more pressing). Another way to feel less guilty about unnecessary purchases is to add “blow money” to your budget. For example, my husband and I get x amount of dollars to spend each month, no questions asked. This will help you feel less deprived and let you buy or save up for the things you really want but don’t actually need. (Note: I truly believe our luxuries are what lead most of us to crippling debt. Most of what we have we don’t really need! Eliminating just a few luxuries can seriously help decrease your debt and keep you from creating more).
4) Set financial goals. For example, you may want to pay off your credit card in 6 months, or you want all of your school loans paid off in 5 years. Set realistic goals, but also challenge yourself. Think about what you can give up in the short term so that you can get rid of that debt. Once it’s gone, it’s an amazing feeling. #1 on your list of goals should be to build up your emergency fund ($1,000 minimum) and get 3-6 months living expenses in your savings account in case of job loss. Once you have this money set aside, you can feel a lot better about the future, knowing you have that cushion to fall on in case something unexpected happens.
5) Eliminate temptation. Take a close look at the things in your life that cause you to spend more money than you usually would. It may be your credit card. Or, those pesky e-mails from your favorite vendors always taunting you with great deals and sales. Cut up the credit card and unsubscribe from the emails! Out of sight, out of mind. The same goes for television/internet – are ads in the media causing you to spend more than you should? Then try to abstain from these outlets as much as possible.
6) Sell, sell, sell! Go through your house and take a look at what you have that you can get rid of. Start making some money off things you don’t need. You’ll get some extra cash AND your house will be less cluttered.
7) Get the most out of what you already have. Consider what you can hold off on purchasing. If you think you want a new car, but you don’t really need to get rid of your old one yet, drive it for a few more months. Who really wants a car payment? It’s a hassle and it’s stressful. If your current car is in decent condition and gets you from A to B, keep driving it until it no longer works. My husband and I are doing just that with our ’98 Corolla. I won’t lie, there are certainly times we would love a newer and nicer car. But not having an unnecessary car payment definitely makes it worth it.
8) Practice the two week rule. When you’re shopping and come across something you want, don’t buy it right away. Wait two weeks and see if you still want it. If you still do, go back and buy it – it may even be on sale by then! You might find in some cases that after two weeks have passed, you don’t really want the item anymore or you forgot about it altogether. This is a tip my mom shared with me growing up (thanks Mom!), and I found that it is really helpful, especially in regard to clothes shopping.
So there you have it. Eight tips to get you started. And trust me, it’s worth it to get started! Once you have more control over your money, you will immediately feel as if you have more control over your life in general. It’s a good feeling!
“Do not lay up for yourselves treasures on earth, where moth and rust destroy and where thieves break in and steal, but lay up for yourselves treasures in heaven, where neither moth nor rust destroys and where thieves do not break in and steal. For where your treasure is, there your heart will be also.” - Matthew 6:19-21