Budgeting Like the Pros
Budgeting can be a tough task to constantly manage. This is something most of will deal with or feel at some point in our journey of having money. Unfortunately, there is not a magic app (although some promise it) which will completely fix your money management mayhem. The good news is there are many techniques for which you can implement in your lives to make it easier. What I am providing below is a high-level view of how my budget works. Some of it might seem ambiguous, but this is to encourage you to go through the classes (coming soon!). It also assumes you have an initial budget setup for which you have been using. If you have notset up your budget, please check out the linkHERE first!
The Finance Free Life Blogger’s Budget
Setup
Our budget has been an evolving beast over the last 6+ years. It is not perfect, but it is certainly 80% better than it was back then. The first item to understand is having categories for which you want to allocate money. We have about 38 categories for our budget. Many are the ones we have discussed before such as mortgage, groceries, etc. There are other categories, depending on how it is set up with the biller, which will require a bit more finesse. One of these is the electricity account. We have elected to have the full payment come out at the end of every month regardless of the cost. This can create problems within the planning due to the constantly changing figure. You do not have to elect for the same option. In fact, many companies allow for a set payment plan. If you HAVE elected for a similar plan for your power or a similar bill, it would be prudent to ensure there is a cushion in the account. Lastly, ensure there is a rollover function for all of the accounts to avoid overdrafts. It is not worth the cost to have a credit line open specifically for overdraft protection. You should have the option within most banks toset up an overdraft protection rollover function from another account.
Usage
It is one thing to set up a budget, it is another to actually use and stick to it. With 38 categories, there is a lot of room for error. Thus, it has taken 6+ years to get to where we are. This is not due to our lack of control or manageability, rather it is due to this big thing called LIFE. When you are young and single with a budget, you can moderate your spending easier. However, when you get older with more responsibility, “adulting” becomes a necessity. This is further accentuated with getting married and having kids. It can be overwhelming at times simply to keep up with life. Thus, creating an even harder time managing the budget. One of these options we have tried is the Cash Envelope system provided by Dave Ramsey. However, this created an issue when we LOST one of these FULL envelopes. Thus, we use cash “accounts” instead. This has provided the most flexibility and ease of monitoring.
Maintenance
Since we have had the luxury of using different methods of budgeting through trial and error, we have a set system now. However, it requires a routine to be followed to avoid over-drafted accounts. As previously mentioned, being single yields an easier experience when managing money. It also creates a huge struggle in managing money. Ultimately, you are the only person who has access to the funds. Thus, if there is a mishap or you have a spending dilemma, you have the only say in the matter. When you are married, you have someone to help manage the money. Yes, you each may be tempted to spend money in your own ways, but that is why marriages need communication. The other aspect of managing money in a marriage is the ability to have a private governing board. If there is a dilemma, you are both in it together and can provide feedback as to how you should proceed. Lastly, for us, we have bi-weekly budget meetings (yes, we actually call them that). This allows us to pull up our budget and our accounts to see what has happened. At this stage in our meetings, most of it is standard with the few exceptions during special events. This also provides each of us the time to discuss lingering purchase ideas. We decide what we want to do, and will either save or take action.
Regardless of whether you choose to incorporate some of how our budget works or not, you need to do something! If you are tired of struggling with finances, you need to take action to stop the vicious cycle.