Budgeting budgeting budgeting!
Budgeting is one of the critical pillars needed, not only to get out of debt but to strengthen your financial future. This is why we have been constantly pushing the importance of putting pen to paper or using an application to tell our money where it needs to go every pay cycle. Let’s face it, actually creating and sticking to a budget is a task and a half that requires practice, patience and commitment.
It has been 16 months since the start of our journey and we have made a tremendous amount of changes to improve our budgeting process.
Here are a few things that helped us significantly:
1. Knowing our exact Income Total
In the past, we calculated our total income based on funds we were expecting to get and not what we had in hand. You could imagine the trouble we were in when pending payments did not come.
This is the main reason why we now accumulate all our money on one bank account throughout the month, until it is budget time. On budget meeting day we look at the account balance and budget using only what is available.
2. Figuring out our budget period.
The budget period marks the start and end date of all expenses you are covering in that timeframe. We budget from the 1st to the last day of each month. It is also very important to know the days that your expenses fall on.
*Using November 2019 calendar* We put gas in our car every Monday. This means that in November we would need to budget 4 weeks of gas; however, our son has lessons every Saturday and there are 5 Saturdays in November. You could understand that assuming 4 weeks for all expenses would cause us to under-budget some expenses.
3. A budget IS NOT COMPLETED on the day it is written.
Before we started our debt free journey, I wrote our ‘budget’ on a piece of paper and forgot all about it, never looking back, never tracking the categories and never making adjustments as the month progressed. After a budget is written, the real work now begins.
We typically pay our one off expenses immediately i.e. light, water, phone etc. Our variable or spontaneous expenses such as supermarket, gas and pocket money are tracked…monitored…stalked 🧐 lol you get it! We document whenever money is spent from these categories. This means that I look at our budget sheet every single day without fail.
4. Never stop tracking
In the beginning, we would always stop tracking when we reached our limit in a category, after all, who needs that kind of negativity in their life 😬. This wasn’t a good practice and did not change the fact that we were overspending.
Continuous tracking even when we meet our quota shows us where our gaps are and what requires attention. Quite frankly, it plays on our mind and says “get it together and display some self control damn it!!” Last month we went over by $508.
5. It doesn’t always go as planned
A budget does not automatically mean that your actual spend will line up. Our budget has 3 columns: projected – what we intend to do, actual – what we do and variance – the difference between the two. We try our best to get our variance at $0 or to have a + number but it doesn’t always happen. Also note that if we go over in one category e.g. groceries by $50, we would try our best to be under $50 in another category to keep our money balanced. Should this fail, we take money from the following month’s income which we hate to do.
6. Have a bare bones budget
What is a bare bones budget? It is simple, the most basic budget possible for you and your family to just survive and make it to another pay period. This bare bones budget was a favorite for the Jones household at the beginning of our journey. Eating out, going out, and even going to town were an absolute no around that time. We got so grimey with our money that it was laughable. Many days we cracked up at how strict and extreme we were, but hey 💁🏽♂💁🏾♀️ it got the job done. We couldn’t have paid so much to debt last year if we didn’t go full skeleton on our money.
In closing, we can never see ourselves going back to not budgeting, even after debt freedom. How were we even managing before? Budgeting is here to stay for us.
Do you have any other budgeting tips or tricks that would be useful. Feel free to share them with us.