I’ve mentioned this here and there on my blog, but my #1 tip when it comes to budgeting deserves a post of its own. After all, it’s the first thing I ever tell someone to do do if they are not doing it already. At least this is what I believe is extremely beneficial in our budget, and to my surprise, not done by a lot of people. I’ll explain how we do it below as well.
When it comes to budgeting, I think the most important thing you can do is…
This is such a simple task, but has such HUGE results. It’s the first step you can take, doesn’t require any money (or saving) to help your budget, and can be done RIGHT NOW, by everyone. Some of you might already be doing this, but I’m shocked when I learn that most people don’t. They just pay their credit/debit card bill (or the smallest amount due) at the end of the month after scanning over their statements, if even that. Before I was married, this was how I “operated” my finances.
In college, I got a stipend as part of my soccer scholarship. I had about $1100 a month to live on. I didn’t receive any money from my parents for college except $200 a month to help me pay for my car (I paid $150), so this was what I had to cover all my expenses. This covered my apartment rent, gas, food, electricity, internet, car, and anything else I needed to live on/enjoy.
I got my first taste of budgeting during this time in college. I had a written budget of what my bills were, but didn’t write down every expense. I used my debit card carefully and watched my statement online. Sure enough, one (or maybe more) of those months I over drafted my account and incurred a penalty fee. Whoops. When my dad saw this, he said, “Tough. You’ll have to pay the fee and hopefully you won’t do this again.” We sat down in front of a computer and he made me go through my statement line by line and calculate what I was spending my money on. It was then clear to me where I was spending money and that I should set a limit for certain categories and stick to it.
Sounds so elementary, but like I mentioned, this method of budgeting is all too common. Some people can afford to do this, but I would argue most cannot afford to “budget” this way. If you’re tracking your expenses, it’s hard to overspend. Plus, it shows you where you’re spending too much money or where you can save.
HERE’S HOW WE RECORD EVERY EXPENSE:
We use an Excel spreadsheet for our budget (this is an update since the last time I blogged about our budgethttp://joyfullyprudent.com/2012/11/30/top-4-tips-to-getting-rid-of-deb/…I’ll post a detailed update soon). I won’t get into the details of our budget in this post, but basically we have our categories (Tithe, Gas, Electricity, Groceries, etc) on the left, then the budgeted amount for the month, then several empty cell boxes next to each category, and the budgeted amount on the far right with the actual amount spent right next to it (see sample below).
Since I make most of the purchases in our family, we decided I should be the one that keeps track all of our expenses on the budget. Ryan does the bill paying and keeps track of his reffing expenses for tax purposes (I still write down any expenses he incurs on our Excel budget when I see them on our bank statement). We both talk about important financial decisions and investments, but the daily budgeting is done by me.
Below is a sample of part of our budget in Excel. Not sure if you can see it well, but click on the image to enlarge it.
This is our actual budget as of last week (no adjustments). Not shown is our tithe, gas, water, electricity, and car gas (and overall totals). These are the details of how we WRITE DOWN EVERY EXPENSE in our budget.
1. First I check our bank statement online (where our credit card purchases are and our checking account for any withdrawals or checks written). I do keep receipts for reference. You can read how I do that HERE.
2. Then I go line by line on our credit card statement and type in the amount spent next to that category. For example, as you can see above, I spent $115.08 at Walmart for groceries, so I would record 115.08 next to our Groceries category. Underneath it I like to put a W so I know I spent that at Walmart. The Notes below each category are for anything I need to make note of regarding that purchase. I use this on some and not on others.
3. Once I’ve written down all the expenses thus far that month, I highlight the last expense I wrote down (should be the last line item on our statement) in yellow. I do this so that the next day (or sometimes the next week…eek) I know where I last left off. Trust me, this is important. I’ve spent several minutes trying to figure out where I last documented purchases when I didn’t highlight it. It will save you so much time. For example, you can see that $2.48 was highlighted in the “Dining Out” category so I know to find that purchase on my credit card statement next time I need to update our budget.
IMPORTANT: If you do this once a day (I try to do it before I go to bed every night), it will take MUCH less time than if you try catching up once a week or so. Not speaking from experience at all 🙂
What about websites that manage your finances for you?
There are programs online that manage your finances and these can be great! Especially if what I mentioned above overwhelms you. If budgeting is not easy for you, this is definitely something to look into. One website I’ve heard great things about (and I’ve even researched) is mint.com. I’m even thinking about checking them out. There are a few things that are keeping me from joining though…
1. We’re controlling – Doing our own budget is the most control you can get over your budget. Plus, you’re more invested in your spending if you have to document each one.
2. Security – I’m sure they are secure as can be, but having just one more company online with our financial info is just one more way to feel less secure.
3. Categorization – This is the biggest drawback for me. They actually have improved their site to allow you to categorize on individual purchases. We would definitely need that with how often we go to Walmart and get things for the boys and the house on one transaction (although I try to split up my purchases at the store). This would, in essense, be the same thing we’re doing now with our budget…which is working.
Definitely something worth looking into though if you’re not even tracking or writing down your expenses. I’ll keep you updated if we make the change ourselves. Bottom line…know where every dollar goes!
I’d love to know how you keep track of your expenses. Do you use an website to budget or do you do it the old fashion way and write it down?
Link Ups: Thrifty Thursday
I’d love to connect. You can find me on Facebook, Instagram (@snyderstellall) and Pinterest.
lauren guenther says
I actually use mint and recommend it. it's very easy user friendly.. you can create your own categories in addition to the ones they have. you can split transactions as well. I use that feature a lot when I take cash out of the atm because I'm spending that cash several different ways. you should try it .. thanks for sharing your ideas!
I think I'll look it over with my husband soon and try it out (along with our current budget in case we don't like). I like the idea you can split expenses, just hope it's easy to do.
Sarah E @ theteacherswife.com says
This is great! I'm still using Excel as well, but I have an 'overall' tab where the general categories are listed and then a separate tab where I list each line item for that category as the month unfolds. It's lots of tabs, so I love that this is all on one page. I think I need to spend some time updating my method a bit. Thanks for sharing!
Dream Mom says
I have a budget template in Excel. Then I customize it every month depending on the expenses. For example, my hair budget changes monthly since some months I'm getting highlights and other months I get a haircut and color Also, I had to rearrange some stuff this month because I had to pay for a crown so the budget allows some flexibility to move stuff around. Once I set the budget for the month then I stick to it. Most of the time my regular budget template is fine however when you get those odd expenses that pop up like the crown then I have to redo the budget for that. I try to cash flow everything I record all of my expenses daily. I tried mint.com a few years ago and didn't really care for it because I was constantly having to move stuff that it categorized wrong and I got tired of that really quick so I just went back to what works best for me. I would say that if what you're doing is working I wouldn't change a thing.
That is a really good point. It's always the "miscellaneous" category that blows up budgets. Getting rid of that category by budgeting everything is a good idea. We use a combination of spreadsheets and also a personal budgeting program called Moneywell. Our software works on the laptop (I jump on twice a month and make sure our expenses are current) and we also have apps on our phones that we use to immediately record expenses as they occur. It's a far cry from the instant accountability of cash, but it allows us the ease of using our mileage cards.
I'd love to know more about apps that other readers use to track expenses. My phone is always readily available, so I'd like to take advantage of that.
As a high school teacher, I feel that it is so important for our students to learn how to budget! We don't have a curriculum for this, and I find that it would be so beneficial for them to learn as young kids. Even giving children an allowance (or something similar) helps them to learn to be responsible with money. Having this trait is essential.
I love reading your blog & all of the financial tips! It definitely helps keep me motivated. You should try out Every Dollar. It's a new free online budgeting tool by Dave Ramsey. My favorite part is that you can add an app to your phone to easily add purchases at any time. Thanks for all you do!!
Felicia Inman says
I love this blog post. I have tried several times to get my excel to calculate my expenses, what I spend, etc… and leave me with what I have left, etc. I still have not figured out how to put in the right functions and stuff for it to do the stuff that you have yours doing. I would love to see a blog post on how you set up your budget on excel and what steps you take to get it to do what it is doing. Sincerely, the horrible budgeter that is trying to find something that works for her. 🙂