Feasting on Debt: Bringing Budgeting Back
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On the shelf behind our bed sits a gallon water jug with the label haphazardly torn off, the words still somewhat visible where the glue was too strong. Our loose change goes there, a jumble of shiny coins that were otherwise destined to find homes under the couch cushions or in the car tray.
Not many coins go into that jar, so this miniature nest egg is hardly feathered. Still, the reminder of it there every morning and night helps keep my eyes on the long-term prize. A prize of a life where that collection of coins represents all that we’ve worked for: one that is debt-free.
A few years ago, I wrote about how we were working on paying down debt. I’m a little embarrassed linking to that, because if we had been diligent, all our debts would be paid off.
Of course, since then we paid for a kitchen remodel with cash and brought a new family member into the mix (and the bills that go with that), so it isn’t as though the pennies were frittered away. Still, looking back at that post has me more determined to finish what we started.
Budgeting is thought of as a dirty word. Any sort of money matters are considered private, gauche to talk about, and because of this many of us are deposited into the world with no real understanding of how to handle our paychecks or the free-T-shirt credit cards we signed up for in college. With all the supposed focus on math in schools, it seems that simple household financial management would be a requisite. And yet, I still meet people my age and older who have never set a budget, instead careening between paydays.
Aside from the obvious (i.e., not running out of money before payday), budgeting provides an incredible piece of mind. Yes, it can be stressful and even scary to see the numbers splayed out in front of you. But just like the fire ants that are taking over
your my yard, ignoring it won’t make it go away.
By most accounts, we make a good amount of money for where we live. And yet, if we don’t budget, we’re dipping into our savings here or using a credit card there. Now that the U.S. is a plastic-based, rather than cash-based, society, it’s all too easy to fritter away your dollars.
All you really need is a pen, paper, and access to last month’s transactions. There are worksheets available online to help; my favorite is Dave Ramsey’s Monthly Cash Flow worksheet (PDF link). Suze Orman also has a budget calculator on Oprah’s site.
First, write down your projected income for the month. This is easier if you’re salaried, of course, but it’s possible with freelancing as well if you know what projects will be paying you. Now write down all your expenses. Don’t forget invisible spending, like trips to the coffee shop or the random gift you have to contribute to at work. Include any savings as well. Assign an amount to each, basing it on last month’s transactions as well as what you predict for this month.
Your goal is to end up with zero at the bottom of the page. I know that might sound weird, but trust me — knowing exactly where all your money is heading, even the fun money for a random new book or outing, helps in the long run.
The average breakdown of categories is:
- Housing: 25-35%
- Car payment, gas, etc: 10-15%
- Utilities: 10%
- Medical & insurance: 10-15%
- Food: 15%
- Savings: 10-15%
- Clothing, entertainment, child care, etc: 20%
Keep in mind that your own percentages might be different depending on your location and size of household.
As the month goes on, write down what you actually spent on each expense right next to your projection. Then when you go to do the next month’s budget, you’ll have a good reference and can tweak accordingly.
You can download apps to help track, or simply use the pen-and-paper method. We use iBank, but I’ve found that if we haven’t budgeted in a while (or if you’re new to it), writing everything down by hand helps you better understand where your money is going.
If you slip up, it’s OK. No one is perfect, and unexpected expenses sometimes crop up. However, staying in control of your recurring expenses will be a benefit when those surprises occur.
In a few weeks, I’ll be talking about grocery budgeting and issue a spending challenge for February.
Do you budget every month, or is the idea scary? I’d love to hear your tips!
I focus on fresh ingredients and easy methods, with spins that keep meals interesting. Dinnertime shouldn’t be stressful or complicated, and I’m here to help you enjoy the time spent in the kitchen. Read more…
I don’t budget but I monitor and try to keep my credit card bill (which I pay off every month) at 1,000 or under. If I’m getting close to 1,000, I keep that in mind when I meal plan and socialize. If I know there’s a trip coming up, I try to pay for pieces of it in the months leading to it and skimp on groceries or entertainment. I’m also very honest about where I am financially with friends so it saves us the awkwardness of my saying, “Oh. I love Uchi, but I can’t do that the next six months because I’m saving for …. “
@Linda Having to say no to dinners out is definitely the hardest part for us. Darn Austin restaurants! 😉
I budget, but not in the typical monthly way. I get paid every two weeks, so I base my budget on a two-week cycle. I make sure I have all upcoming expenses (bills, birthday presents, appointments, events, etc.) on my Google calendar as recurring items, and I use that to make my new budget spreadsheet every two weeks. Once all those expenses are accounted for, I allocate money towards groceries, fun, gas, and savings (all the variable things). If I know I’ll be having a dinner party or something, I’ll allocate more grocery money, or if I know I have a lot of stuff to use in the freezer, I’ll allocate less. Same concept applies to fun money and gas. Savings is all my leftovers. If a cycle is really packed with bills and other expenses, I might not have any extra money to save that cycle, and may even have to pull out a bit from savings. But then other cycles, I’ll have very few bills and will be able to save $1000+ from a single paycheck. I know this fluctuation would probably drive some people crazy, but this “moving” budgeting has really worked well for me, because I always know I’m doing the best that I can without stressing about not saving exactly X%.
@Nicole Thanks for sharing! We used to put our bills directly on the calendar as well and it really helped us see that no, we can’t buy X even if we have the money now because there is a vet appt coming (for example). I think any method is great if it works for you!