Jan 07 2008

Better Budget Challenge #1 — Our budgeting experiences

[singlepic=70,187,86,,right] My husband and I want to handle our money in a way that works for us. We’ve briefly tried traditional budgeting in the past, but what’s the point of doing it, if we don’t stick to it?

If a budget doesn’t work, you can either change yourself, or change how you budget.

I’m a little more stubborn than a budget. So, we’re changing how we budget.

In the past, we’ve budgeted by setting arbitrary dollar amounts on things we might or might not need to buy for the month. For example, $50 in the entertainment category, $50 in the household goods, etc.

How did we come up with those numbers? I have no idea. They were plucked out of the clear blue sky.

Sometimes, we’d hit that $50 mark. Others, we’d exceed it or not spend any at all in that category.

Our budget was arbitrarily telling us how to spend our money, and it wasn’t working for us at all.

Before I go any further, I will lay down a disclaimer:

I am not a financial professional. I am not acting under the advice of a paid financial professional. This is my personal finance–personal to me and my husband. Your own personal finance is personal to you. Make decisions based on what’s best for you and your family.


Still, we aren’t walking blind. My husband has a degree in business and works in corporate finance as an accountant for a large corporation.

At his workplace, with millions of dollars coming and going all over the place, they absolutely have a need for a written budget.

But for a family of two people, we don’t need a similar type of top-down money management.

Budgets are effective for controlling company money, but for us, budgets are not an effective way of managing our financial behavior.

If used in a certain way, traditional budgets can be a tool to help you make poor decisions, without you even realizing it.

For example, if you squeeze in a little extra money when setting a budget “because you deserve it” you’ll be giving yourself permission to spend that money freely, even on things you shouldn’t buy, just because it is “in the budget.”

I’m not saying you shouldn’t take care of yourself, or you shouldn’t have a little “blow money,” I’m just saying that chaining yourself to a budget could be a bad thing.

When you don’t achieve your budget, you’ll feel like a failure. When you do meet your budget on paper, you’ll feel pretty good. And yet, the budget could be all wrong for your family, and give you a false perception on the state of your financial matters.

For example, if you set a grocery budget of $150 per week, do you think you’ll ever spend $75 per week on groceries? Probably not. There’s not much motivation to spend less. When the budget on paper says you can spend $150, you’re likely to try to spend that amount.

Instead, I prefer looking at my spending patterns, seeing actual dollar amounts I’m spending, and then try to reduce that figure.

I am not giving myself permission to spend that full $150 (or whatever). Instead, I’m challenging myself to see just how low we can go.

I recognize that my approach won’t work for everyone. No worries! This first challenge will help you evaluate your personal budgeting needs.

Better Budget Challenge No. 1:This week, I’d like us to take a self-assessment about our budgets in general. Here are some questions to guide you. I’ll post my responses later today.

  1. How have you used a budget in the past? Be specific. How did you set it up? Did you use a spreadsheet? Pen and paper? A software program? What are the nuts and bolts of how your budgeting system(s) worked?
  2. If you’ve never had a budget, how have you made decisions on how to manage your household finances?
  3. How did you put your budget to work? Did you use a cash envelope system every month? Track your expenses and purchases in a database of some kind? How did you do it? How many people (i.e., you and your spouse) participated in that budget?
  4. In what ways did your budget (or lack of) work for you?
  5. In what ways did it fail?
  6. Think about your past experiences with budgets and your home finances. How do you want to use a budget in your personal finances? Do you want a system that you update every time you make a purchase? Every month? Do you want to have spending guidelines?
  7. What is your overall purpose in establishing a household budget? What do you hope to gain from it? Do you want to get out of debt? Have money to save or invest? Reduce your expenses? Have a better idea of where your money is going?
  8. Anything else you want to mention about your past or future budgets?

Estimated time of this challenge: 20-30 minutes

Estimated effort level: Low — just some personal reflection and typing

Estimated benefit: High — you’ll put on paper your ideas on budgeting and you can gain insight on how it can be improved. Also, your responses can help others learn from your experiences

If you’d like to participate, post your responses on your blog. Please link back to this post. Put the direct link to your post (not your homepage) in the Mister Linky tool below. Then, visit other participants and see what they have to say. Comment! If you don’t have a blog, feel free to use the comment box below for your responses.

Why am I doing this year-long challenge? You can read my introductory post on it here, but basically, I want to reduce our household expenses to their lowest possible levels, while still having our needs met. Before I can effectively reduce any particular expense, I need to know how much I’m spending on those things already.We’ll start with establishing budgets that work for us, and then together, we’ll tackle ways for cutting our expenses. I hope you’ll join me!

18 Responses to “Better Budget Challenge #1 — Our budgeting experiences”

  1. Great job! You’ve convinced me to get back into blogging! Thanks!

  2. My answers are up on my blog page. I’m going to add you to my blog roll and I’ve just tagged you. I hope more money saving conscious people start coming to your site.

  3. I’ll put my answers up later this week. Meanwhile, check out my frugal reading/crafting challenge.

  4. I posted my answers. I think we had a similar situation as you, how do you set the amounts? I think that is where we failed last year and want to improve this year.

  5. Nice post hereKacie, I have been figuring how to start up a family budget this year, although I have never done it before, I am newly wed as well, I hope with this few tips on your post, I will be able to start a budget.

    Thanks once more.

  6. I am definitely looking forward to being a better spender in 2008 :)

  7. Thanks for the challenge. I have posted my week one answer.

    Cant wait for tomrorrows challenge.

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Hey! I'm Kacie, wife to Shane and mother to Jonathan (7), Vivienne (5) and Amelia (2) . I write about my family's finance: how we save money, improve our spending, and plan for the future.

I hope I can inspire and encourage you to improve your situation. See disclosure.

I'm adopting a much slower-paced posting schedule, and treating this as a hobby blog now.

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