Whether you are trying to save money to be able to stay home, a single person learning to plan your future, or a middle-aged couple simply trying to get control over finances – having a solid budget to follow is the first and most important step!
Early in our marriage we had the best financial intentions – we tried to not spend extravagantly, got a small and inexpensive apartment, and were both working hard to bring in an income. But to demonstrate how important a budget is; we are financially doing better now (owning a home, one income, two kids) then we were in the first few months after marriage (small apartment, two incomes, no kids)!
The biggest change we made was to start budgeting…aka knowing exactly how much is coming in, how much is going out, and WHERE it is going.
Prepping your mindset
If you or your spouse aren’t super familiar with keeping a budget, the process is really very simple and usually takes less then an hour of time during the month. The main obstacle to most people (especially natural spenders) is to stick to it!
I have three main suggestions that have helped us in motivation and changing of habits:
- Watch the Dave Ramsey Financial Peace University! They offer classes in most areas and I know that is a very motivating way to learn. We were unable to find a class that fit in our schedule so we ordered the DVDs and watched them from home. I’m telling you – doing this changed the financial portion of our marriage! You and your spouse are going to have different views on money (from personality and how you were each raised) and this really helped us understand each other and get on the same page! After you purchase the materials you will also have full access to his resources and prepared budget outlines which we are still using months after taking the class.
- Make your budget your bank account. A mistake that we made early on was to keep in the back of our mind that we had a “back-up” savings account just in case something unusual came up that we wanted to spend money on. When you have that mind set it is amazing how many unusual things come up EVERY MONTH and how quickly you no longer have that savings account! If you treat your budget as your bank account then when your budget has nothing left, you need to mentally say there is NO money left in your bank account. You HAVE to make do with what you have because you CAN’T spend money that’s not there!
- Keep your eye on the goal. Dave Ramsey has a seven-step path to follow to financial freedom and the first step is to get a savings account with $1,000 in it for emergencies. As he puts it, this isn’t to make purchases with, this is for TRUE emergencies (medical, car died, tree fell on house…etc). The second step is to pay off ALL debt except your house. Since changing the way we are managing our money, we have been blessed multiple time with extra cash coming in (job raises, Christmas gifts, tax returns, garage sales…etc) and instead of spending it on that “I want” stuff we would have before, we continued to live on our minimum budget and put the extra money toward debt.
The nuts and bolts
I’m not going to truly teach you how to make a budget in detail because that is WAY to much for one post (and Dave Ramsey does it a whole lot better then I could). But once you have to budget, these are some things that helped us continue sticking to it and improving our finances a little more each month.
- Make a new budget each month. I grew up keeping a budget but this was still a new thought for me. But the bottom line is that each month has a lot of the same expenses but also has unique expenses that need to be accounted for. If you budget the same in the gifts category in the month of December that you do in the month of June, your budget will be off. So at the end of every month we sit down, look at our next month’s schedule AND THEN put together our budget. I will first put in the “non-changables” (house, car, insurance, etc) and then divvy up the rest.
- Update the budget at least once a week. There really is no point in having a budget if you are unaware if you are sticking to it or not. When we first started, we would put together a budget each month, try to cut spending wherever we could and then see how we did at the end of the month…let’s just say we didn’t usually do very well. You won’t know if a category has been fully spent unless you keep up on it throughout the month…and if a category is spent it is time to either get creative with what you already have OR do without!
- Never give up on saving MORE! We have our emergency fund built and are in the middle of paying off our debt. But that is just the first two out of seven steps to get to financial freedom…and the sooner we can get there the better! So once we had our budget built and had tried it for several months to make sure we had put the optionals in the right places; I started going down the budget, category by category and seeing how I could cut it even more. How can I spend less on groceries? Is there a different company that would give us a better deal on our internet? Could we get by with basic phones instead of smart phone? Do we really NEED two cars?
“Live like no one else so that later you can LIVE LIKE NO ONE ELSE!” Dave Ramsey”
I would love to know your budgeting story! What has kept you motivated and helped you and your spouse communicate about money?