I love budgeting. It’s a huge part of my professional and personal lives. But I also understand that most people cringe when I talk about it. People can have a lot of preconceived notions about why not to budget: It takes too much time, I feel guilty when I spend outside my budget, or I don’t know where to start. But there are also a lot of reasons why you should budget anyway.
Excuses I've Made Before
It takes too much time
If you do a little bit at a time each week, it won’t take as much time as you think. Set yourself up for success by rewarding yourself when you work on your budget at home. Make it something to look forward to by using it as your time to enjoy a nice coffee, have a glass of wine, or put on a face mask. Budgeting doesn’t have to be this thing you dread if you give yourself a little incentive to get it done. I feel guilty when I spend outside my budget Budgeting isn’t about feeling guilty. Budgeting is about taking better ownership of your expenses. To quote my favorite financial feminists, Sallie Krawcheck, Co-Founder and CEO of Ellevest, “If you want a latte, buy a frickin latte”. Leaving zero room for for fun expenses like lattes, drinks with friends, or avocado toast, you are setting yourself up to fail. Only budgeting for the essentials like rent and food may sound like the responsible decision, but life happens. You’ll want to get drinks with friends or need a to-go breakfast to motivate you out of bed for work or class. If you set the unrealistic expectation of not budgeting for these “splurges” you’ll never have a month where you “stuck to your budget”. So if you want the dang latte, get the dang latte. The important thing is to do so in a way that is proportional to your income by making a budget that is a realistic goal. I don't know where to start Starting any new habit can be challenging. Sometimes we get stuck on a preconceived notion we carrying into learning how to budget. Maybe you’ve tried budgeting before and you had a bad experience. Maybe you feel that if you don’t start, you can’t fail. Maybe you get stuck on trying to figure out how to estimate how much to budget for a certain category. When you don’t know how to begin, one of the easiest places to get started is just by categorizing the expenses you make every month. With these three steps I want to teach you how easy getting started can be. Step 1: Picture Your Future Financial Self
One of the financial goals I have for myself is to pay off my student debt. For me, this is a big goal and I understand that realistically I’m not going to accomplish this in one or even two years. There is so much that I’m looking forward to in life that my debt holds me back from. I want to make pasta in Italy. I want to have space to grow my own herb garden. I want to live somewhere with an in-unit washer/dryer so I don’t have to walk up and down two flights of stairs for every load of laundry. I want to be the cool aunt who brings back goodies from her adventures. I want to order a glass of wine from a menu without looking at the prices first!
What are the goals in your head? When you get stuck or lose that motivated feeling when it comes to your monthly expenses, remember the vision you have of your future self. Ask yourself how the individual steps you’re taking this month are getting you to that goal. It may feel like $30 in your savings account doesn't make a difference or that a recurring $20 a month towards a Retirement Account won't amount to anything, but you’re wrong. You may be starting small, but building a well-tuned financial mindset is what’s going to serve you in the long run. You may be starting small now, but you won’t be there forever. Step 2: Every Month, Categorize each of your Expenses
On Sundays I go through my checking account and credit card transaction histories once a week and sort each expense into one of the categories I’ve set up in my budget spreadsheet. The purpose of this exercise isn’t to make you feel guilty about every single purchase. Rather, the point is to make you feel more aware of where your money is going. Let that awareness and the financial goals you made guide you during this budgeting process. Use the template below to keep a log of each purchase you make throughout the course of one month. As the month progresses you’ll get a better picture of what your spending habits. When you’re setting up that first month and it’s too hard to estimate how much you’re going to spend in each category, it’s okay to skip it or make a guess that ends up being wrong. That’s okay. Getting started is half the battle.
Step 3: Take a Look at Those Numbers and Reevaluate for Next Month
Did the amount you spent in each category line up with your estimate? Were you surprised? What did you learn about your spending habits? When we see exactly how much we spent on a single category like work lunches in a single month it can be pretty surprising. Before you start over for the next month, take time to reevaluate each category. Did you make estimates on how much you expected to spend on each type of expense? Did you meet the goal or did you miss the mark? If you did, that’s okay. Think about the decisions you made over the month and what you would change to do better next time.
Why I started Budgeting
I used to have so much anxiety surrounding my own finances. I would feel so guilty in the grocery store for choosing $1.89 mac and cheese boxes over 29 cent ramen packets. I would splurge for one night getting drinks with my friends and feel sick with guilt for the rest of the month. The back and forth I felt over my finances took a toll on my mental health, my physical health, and my academics because I wasn’t giving myself the tools I needed to be successful.
When I first started budgeting I didn't know where to begin. I wanted something where I could set spending goals and monitor where my money was going. I tried looking for templates online but none of them seemed to fit my needs. I was still in school and was working a couple part-time jobs at the time so I struggled to relate to the sample numbers of having a $60,000 a year income and spending $500 on groceries. I couldn't get relate to it so I struggled to set it to my own information. Instead I made my own spreadsheet. Even though I wasn’t making a lot, keeping a log of all of my purchases each month helped ease the anxiety I felt. It made me feel like I had more control over my financial situation because I could take this intangible concept of cash flow and turn it into something more concrete. Seeing where every penny I spent fell helped me feel more aware of how much I had left for the month. Over time I got a better grasp of where my money was going and I began to develop better saving habits too. Seeing in a spreadsheet the difference between going out for Chipotle or stashing that $13 into my savings account helped motivate me towards the financial goals I had for myself. Two years later I’m still in debt and I’m far from the perfect budgeter, but I have a stronger grasp of where my money is going. More importantly I don’t let my budget own me. It may feel like budgeting puts a financial leash on your spending, but in reality it’s done the opposite for me. It’s given me the freedom to stress less about money. No one’s financial situation is perfect, but budgeting helps me feel more in control about where I’m steering my future. How can you use a budget to work towards your own financial goals?
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AuthorEmma Neale: (young) adult, cat mom, and aspiring for adventure. Archives
February 2019
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