Budgeting 101

Budgeting usually makes people tense and nervous.  It can make ME tense and nervous and I have a degree in accounting!  There are a few fundamentals that can help as you start making your budget. 

1.  Expenses should be less than or equal to income

I know that one seems obvious but sometimes people think, "It's okay, I'll put it on my credit card."  The credit card is a GREAT invention.  I use mine every time I go to the store.  But a credit card is only your friend if you pay it off in full every month.  If you don't, you'll get hit with interest at an exorbitant rate. 

It is also easy to borrow from next month's budget if you have money in savings.  I do this myself on occasion.  (I'm out of money in the clothes budget this month but I can use some of the money from next month's allotment to help out.)  This solution works if: 1. You actually have money in savings to cover the deficit this month and 2.  You actually "pay back" the money the following month.

2.  Pay the Lord first and yourself second

I had a professor who taught us this rule of thumb.  The idea is to live off of what remains after tithing and savings instead of hoping there will be enough left over to cover those at the end of the month.

While I was in school, I had to "revise" this rule a little.  There was enough for tithing but I was USING my savings to pay for tuition.  There are times (in my opinion) when it is okay to not save.  Education is one of those times.  You need to view the education as an investment in yourself and a means to allowing you to save in the future.

There are other times when money will just be tight.  In these situations I would advise you to always pay the Lord first.  Then, if you can put any amount away, even just a dollar or two, do so.  That way you can keep the habit of saving.  As your finances improve you can increase the amount of your savings.

3.  Discuss your budget with your spouse

Money causes marital strife.  Note I did not say it can cause strife.  It does.  When you are planning or reviewing your budget, you need to discuss it with your spouse.  Sit down with each other and decide what is important to each person.  Decide together how much you think should be allotted to each expense category.  Don't let one spouse make all the decisions because it can lead to resentment and misunderstandings.

Discussing the budget with Nate has really helped us see eye-to-eye where money is concerned.  We each know what the monthly limits are for each category.  When we've reached the monthly limit we know we need to stop purchasing in that area until the next month.  It helps us keep our expenditures less than our income. 

Budgeting also helps us in our different attitudes towards money.  Nate, for example, likes to save up and buy really nice things for his hobbies.  I, on the other hand, like to save up for things...but then I often end up saving the money instead buying what I was planning to purchase.  Knowing this difference in our attitudes we set up "hobby funds" where we budget a certain amount each month for each spouse.  That amount is ours alone to spend as we see fit.  This has prevented a lot of marital strife because I don't stress out every time Nate buys something for himself.  I know he's saved the money out of his hobby account.  Vice versa, Nate can encourage me to actually buy things I would like instead of hearing me constantly say, "We don't have money for that."  I joke (only half in jest) that the hobby funds are essential to helping keep the peace in our marriage.

4.  Keep regular tabs on the budget

Ideally you would track your budget daily so you always know where you stand.  But who has time for that with kids, work, church responsibilities, etc?

Try to track your budget as often as time will allow.  My goal has always been to sit down each week to go through my budget and see where things fall.  However, I don't think I've ever actually done that weekly.  Lately I've had success at doing the budget twice a month - once around the 15th of the month to see how much money I have left and once after month's end to see how things panned out.  

5.  If you exceed the budget one month, try, try again

No one is perfect.  You will not always remain true to your budget.  Instead of feeling defeated, view it as a challenge to do better next month.  

Budgets also take time to actually develop.  It will take several months of tracking expenses so you can see where your money is actually going.  Then you can better plan where your expenses each month are and how much you should allocate to each category.  

Using computer software to help track your budget is a great time saver.  I personally use Quicken.  I also know many people who use Mint.com to track their money.  (Both Quicken and Mint.com are products of Intuit.)  These programs can link up to your bank accounts and credit cards, download your deposit and expenditure data, and categorize that data so you can easily track where your money is going.  They make budgeting so much easier and less time consuming.

And now, on a different note...

Budgeting can be stressful and not always fun (unless you are a nerd like me and enjoy seeing the pieces fit together).  Reward yourself with these addicting cookie dough truffles.  I made them last Sunday and I will warn you, you cannot stop at just one.  I followed this woman's recipe with two exceptions.  I used regular-sized chocolate chips and milk chocolate melting chocolate because that is what I had on hand.  They still turned out deliciously.