Budgets have always been a tough sell. However, in workshops I teach around the country, I’ve noticed a hopeful sign.
Instead of flat out resisting the idea, more and more people are asking questions about how to stick with a budget. They’ve crawled (or were pushed!) over the first hurdle of starting a budget. Now they need help staying the course.
Here are some suggestions:
Know the Goal
No one wakes up in the morning excited about the idea of putting together a budget. Using a budget is not the goal. A budget is a means to the goal.
Do you want to buy a house? Become debt-free? Take a special trip?
Now those are goals that’ll get you up in the morning, and using a budget will help you get there.
Choose the Right Budget Tool
Using a budget does take some work. There’s no getting around that. However, some budget tools fit certain people better than others, so make sure you’re using the tool that’s easiest for you. Here are the main choices:
Paper and pencil. As the name suggests, this is a purely manual system where you develop a written spending plan and then write down how much you actually spend each day. It’s one of the simplest systems to use, requiring no software training. Try a Budget Quick Start Guide!
The envelope system. Once you set an overall plan for your monthly income, this system will make it really easy to see how well you’re staying within your budget. Let’s say you have $80 budgeted for clothing. If you get paid once a month, you would deposit your paycheck into your checking account and then withdraw $80 in cash for your “clothing” envelope. When you go clothes shopping, you take that envelope with you, pay with that cash, and put any change back into that envelope.
Need to see how much more you can spend on clothing at any point in the month? Just look inside your “clothing” envelope and count the cash.
You wouldn’t use envelopes for every category, but for groceries, clothing, entertainment, and many others, the envelope system works really well.
If this system sounds appealing, read this comprehensive guide to the envelope system.
Budget software. Quicken dominates this space, but there are other players as well, including You Need a Budget. Such products cost money, but they offer the most extensive analysis tools, which may appeal to you if you’re very detail oriented.
We use Mint in our household and I’m very happy with it. Since it’s online, I’m no longer tethered to one computer, as was the case when we used Quicken. It’s not as detailed as Quicken, but it gives me what I need. I like the fact that it automatically categorizes a lot of our transactions, and, at any point in the month, it tells me really quickly how we’re doing in each of our budget categories.
Expect Some Challenges
One issue that a lot of first-time budgeters face is they forget to record what they spent for a day or two, get frustrated, and quit. One of the most helpful features of a Cash Flow Plan document used in a paper and pencil system is the row of numbers at the bottom. Those are the days of the month. After you record each day’s spending, cross off that day’s date as a reminder that you are current.
As a Mint user, I’m in the habit of checking our budget first thing each morning, mostly to see if recent transactions have been categorized correctly. At first, you might have to put that task on your calendar, but eventually it’ll become a habit.
Another common issue is forgetting to plan for certain expenses, like home and vehicle maintenance.
Non-budgeters imagine budgets as rigid and constraining, but the best budgets are designed with some flexibility. For example, don’t get all worried about trying to figure out if that take-out food you had for dinner last night should be categorized as “groceries” or “entertainment.” If your grocery budget is almost tapped out, call it entertainment. If you’re running out of room in your entertainment budget, call it groceries.
You won’t get the budgeting thing down to a science right away. No one does. But stick with it. Over time, as you start to experience the many benefits of a budget, like a much greater sense of control over your finances, you’ll be motivated to keep going.
If you use a budget, what other keys have you discovered that help you stick with it?