Budgeting 102

So Step 1 is making a budget spreadsheet. And it's very important to remember that you can't make a million budget and lifestyle changes at once. It took me over a year to become the meal-planning, coupon-using, spreadsheet-making value monger I am today. I did not try to implement all of these things at once. In fact, I am just now arriving on the door of the coupon. Trying to do it all at once is impossible and will result in utter failure.

If you get paid only once a month, it's tougher, and I recommend doing some sort of mental game wherein you parcel your money into halves or fourths and hide a portion for later. This only works if you are VERY disciplined. If you are NOT very disciplined, maybe you could ask a friend to "hold" it or you could mail it to your mother for safekeeping. ;)

That way you are dealing with a smaller amount and can manage it better. We do very well week by week.

I do a spreadsheet for the month, and then each week I go in and tweak and revise as necessary. I project, pay, dole out spending, and put money in savings. If your budget (like ours) is such that things are really tight, this really helps to avoid overspending in one area and being short in another one at the end of the month. It is really important to me that all of our bills get paid and on time, and that we don't charge anything EVER. It is best if we are able to sock something into savings every week or even month, but that honestly doesn't always happen.

Stephanie found that doing the "envelope" system worked best for their family. She puts the money they need in an envelope for each bill, and an envelope of cash for each of their "spending" money. When the cash is gone, it's gone. No chance of an overdraft or an overspend on the budget this way!

Step 2 is EVALUATING.

At the end of the week, I look back over our bank register (oh how I LOVE online banking) and see how we did. What did I spend on food? What did I spend on entertainment? Where could we have done better?

I started with just the budget spreadsheet. I spent a lot of time looking at our money, seeing where the bulk of it was going, thinking about what I spend and if it really satisfies me or not. "I spent nineteen dollars last week on a top at Old Navy, because I was really craving something new to wear. Do I like that top nineteen dollars worth?" I came to the conclusion that most of the time, the five dollars here and nine dollars there that I'd shell out for this-and-that didn't really bring me any pleasure at all. I also started adding up all of our "random" spending, and trying to see the big picture. What "big" thing could we have if we had cut out the lion's share of that nickel and diming last month? We might be well on our way to affording a new piece of furniture or to paying off a big doctor bill.

So instead of buying clothes when I felt like it, or because they were on sale, I started buying them when I really needed them. If I need something to wear to an interview, I allow it. If my only black pants get a hole, I replace them. If the season is changing and I don't have enough work clothes, I purchase a few things to tide me over. But I don't ever just "go shopping" for fun.

So that was my first baby step. I made the spreadsheet and I closely examined every dime we spent for quite a few months. And in that process, I began to see every dollar as a big deal. Every time I thought about buying a coffee, I saw it as a line on the spreadsheet. Every time I picked up a non-necessity at the grocery store, I added it to the coffee I didn't buy in my head, and put it down, realizing I was starting a nestegg.