Most people, even me, don’t like the idea of budgeting. The problem with budgeting is you can’t do what you want with your money. You have to have spending categories for your money and who wants to do that.
I remember when I got out of debt. I was so excited I took my daughter to the mall and we spent money like it was free water. I wasn’t too concerned about the price tag and what we like we bought. It was like the scene from the movie Pretty Woman when Julia Roberts had all those bags. The only thing is 1. I’m not a movie star or even a prostitute being swept off my feet by some handsome tycoon. I was still a single mom who had a young daughter and a mortgage. I didn’t even have my emergency savings fund. But I spent.
I understand that everyone has a right to treat themselves but I wasn’t that restrictive in the final days of my paying off debt that I needed to spend that much money. I still should have set a budget.
Setting a budget is simple if you think of it as categorizing your expenses. You can also look at it as your own personal savings plan.
Budgeting just means:
When you set a budget you are to ensure that every dollar has a place even if that is your fun or spending money. Going through the process of determining where your dollars need to go to can be arduous and time consuming in the beginning. I recommend a couple of ways to see where your money is going so then you can see what you spend your money on and maybe make changes from there.
- Go and dig out your bank statement for at least three months. This will show all of your withdrawals and debit transactions as well as what cash you have coming in. You can categorize your spending just from your statements. You can see what is designated as groceries, restaurants, clothes, rent/mortgage, gas, etc. You can make an excel spreadsheet and place all your data in there.
- Review all of your credit card statements and see what you are spending even if you are paying your credit cards off every month. One year I was spending as much on my credit cards as I was spending from pay all in the same period. There was no way I needed to spend that much.
- Review what you spend your money on and see where you can make some cuts not IF. One of the biggest budget busters is eating out. While a lot of financial gurus talk about a latte a day won’t be that much of a budget buster in the end it could be. People who buy coffee daily don’t just stick to buying coffee daily. They get into a habit of just eating out and grabbing too many quick meals here and there.
- Look whether there are things you are spending your money on that you don’t engage in, for example, gym memberships. I once had a membership to a spa and paid monthly for services I never participated in. That spa went out of business I was not able to get a refund of any unused services. So I literally wasted hundreds of dollars.
- Even if you can afford certain things that doesn’t mean you should be spending your money on it. You may be one who $25 a month doesn’t really matter but why spend $300 yearly on something you don’t use and which could be going towards your savings or another expense?
- Everything you spend your money on should have a category. This is the only way you will see what is wasteful spending.
Once you have looked at how you spend your money with your budget you can now make a new plan for future expenditures. There are a lot of sample budgets online our you can make one yourself from an excel spreadsheet.
This monthly budget sheet is ideal because it’s easy and has fixed expenses vs non fixed (variable) expenses. The categories are also pretty inclusive and this is something that can be replicated in a simple excel spreadsheet.
Because so many of us can’t keep track in our heads of how much we spend a budget like this can keep you in track. Also, because we are a society that can function with our phones you can take screen shots of your excel spreadsheet to keep you accountable. You may also want to use it as a screen saver.
Sticking to a budget is not fun but neither is being broke.