Glblguy is the author of Gather Little By Little, a personal finance blog with a Christian perspective. If you enjoy this article, consider subscribing to Gather Little By Little through RSS or Email.
Two years ago, we didn’t live on a budget. My wife and I had tried to budget many times over the years, but always failed for one reason or another. I honestly felt that budgets were something people talked about doing, but never really did successfully. About a year and a half ago, I started listening to Dave Ramsey and he made me realize a few things key points that made budgeting simple and easy. Here are a few tips I’ve learned that have allowed me to be successful with budgeting and will help you too:
Create a new budget for each month
One of the many reasons I struggled with budgeting was that I tried to put together a single budget that was the same for each month. While having a single budget may work for some, it didn’t for us. It was just to difficult too manage. Fortunately, there is a much easier way: create a custom budget for each month. Since each month your expenses (and possibly your income) will vary, it only makes sense to create a budget specifically for that month.
Create the budget before the month starts, and factor in any income and expenses you will receive or incur that month. This avoids the complexities of the “one budget fits all” syndrome and will make your budget more successful. We’ve actually even taken this a level further and now budget for each paycheck. I get paid twice a month and we create two budgets for each month. We did this to avoid overspending any one paycheck. I know for some this may sound tedious, but it has made managing our finances so much easier.
Create a zero-based budget
Every dollar you will spend should be assigned to a category, and the difference between your income and expenses should be zero. This is called a “zero-based budget.” Running a zero-based budget forces you to fully plan your spending and puts a purpose to each dollar you have. This includes savings and debt payments as well. We used to just have a “remaining” row where whatever was left over was placed. We never failed to somehow spend that money, and not where we really wanted or needed to spend it. Giving each dollar a home solved that problem.
Married? – Do your budget together
I’ve written on this topic beforeand really feel that doing a budget together with your spouse is critical to the success of your finances and even your marriage. Money problems are the number one cause of divorce in the US and many of these problems can be solved through better communication and a simple budget. Generally in a marriage, one spouse creates and manages the budget. Typically it’s the more detailed person, or whom I call “the geek”.
In our marriage, that’s me. This is a pretty typical situation and isn’t a problem at all. The problem occurs when the non-geek has no input into the budget or the finances. When this happens, they feel controlled and frustrated. A better option is for “the geek” to write-up the initial budget and then review it with their spouse, allowing them to have input and even to change it. Both of you can then agree to the budget and follow it together. I go so far as to recommend having weekly budget review meetings where you review the current status of your budget and discuss and agree on any changes that might be necessary.
Update your budget daily
During my first few months of budgeting, I would wait until the weekend to update our budget. I would get frustrated because it took me so long to do. Instead, I’ve started updating the budget daily. I found it far easier to spend 5-10 minutes updating the budget each day, than to spend an hour or two doing it on a weekend. The side benefit is I always know the status of our finances.
Save money for upcoming known expenses
Most of us have large expenses that don’t occur monthly. These include: insurance, property tax, home owners association dues, and even Christmas expenses. Instead of scrambling the month these expenses come due, allocate a monthly amount and save it. For example, our property taxes are due each December. They generally run around $2000.00 for both county and city taxes. I created an ING Direct account specifically for our property taxes, and each month starting in January I transfer $167.00 to that account automatically.
This is a fixed amount in my budget under the savings category. In December, I transfer the amount necessary to pay the bill into my primary checking account and write out the check. No more stress on how to pay for it during the already tight month of December. Another side benefit is the money collects interest over the year.
Do you budget? If so, what are the key strategies you use to make budgeting successful? Add a comment!