So I’ve laid down a bit of foundation for how to get started with your budget, now it’s time to dig into the details!
Patrick and I have been budgeting for about 3 years now and it has allowed us to save, buy a car in cash and prepare financially to pay off my student loans. I want to preface this post by saying my husband has an MBA with a focus in finance so everything he has taught me is based on his knowledge from school and research that he has done. I also want to say that everyone’s budgeting situation is going to look differently and I don’t want those of you reading this to feel like you can’t achieve similar things because you don’t have a resource like I do! Everyone can do this! It will however take, persistence and discipline, lots of discipline.
Let’s get to it! Once you’ve determined where your money is going via the instructions I wrote in my first budget post, now it’s time to determine your financial goals. Maybe you just want to build a nest egg, maybe you are wanting to save so that you can buy a home, or maybe you’re preparing to pay off a large amount of debt.
In our house we are firm believers in paying ourselves first. What do I mean by that? A common mistake is that a lot of people pay their bills and then put whatever is leftover in their savings. You actually want to do the opposite, you want to put money into your savings and then pay your expenses. Say you want to buy a home in 2 years and you need $12,000 for the down payment. This would equate to saving $500 a month, every month for 24 months. If you can save more, great! Work this out to fit what you are able to do comfortably even if that means saving $100 a month! This set monthly saving goal now becomes your #1 fixed expense. This needs to be paid before any other of your subsequent expenses. Then you can frame the remainder of your budget after that.
In our budget we have things like our mortgage, groceries, personal budgets, bills and utilities, etc. Now some of you may be asking, “what if I do not have enough money after I have paid my savings goal to cover my expenses?” A key to a successful budget is knowing when you need to make adjustments. Are there areas where you can cut back in order to meet your savings goal? How important is your goal? Can things like eating out several times a month be cut back in order to achieve your goal? Can you find ways to trim the fat? For me, that was cutting my personal budget down to only $150 per month. Yes, you read that correctly…I only spend $150 per month on coffees, eating out with friends, my nails. etc. You’re not going to get all of your budgeted amounts perfect the first couple of months, this is something that will evolve over time. Just try setting a goal and sticking to it.
The tool that we use to help us stick to our budget is the app. Mint. This app is a customizable budget tool that lets you set and monitor your budget easily. Mint tracks your budget, graphs your income vs. your expenses, and monitors your monthly cash flow amongst other helpful features. I highly recommend! (See image below *no this is not ours*) If you’re someone who prefers to not have all of their financial information in the digital world then I recommend using the “envelope technique” this is where you withdraw cash each month for each of your budgets and store them in individual envelopes. I have a friend who uses this technique and it seems to work well for her and her husband. Instead of envelopes they use a cute little multi-pocket organizer to house their cash. We no longer use Mint, my husband wanted a more detailed way to track our expenses so he created a spread sheet. The goal here is to find what works for you so that you will stick to your budget in order to achieve your financial goals!
I know that this is a lot to take in but you’ve already begun to take the necessary steps towards achieving your financial goals! Remember what I always say, have grace with yourself! Challenge yourself to achieve these goals but remember that these things take time.