Budgeting

I Resolve To Budget!

Everyone wants to start off the New Year right, in one form or another. One out of the top 20 most common New Year's resolutions is to start a budget. Starting a budget is a popular resolution that many have difficulty accomplishing. Keeping this resolution often requires a major reduction of people's comfort and conventional habits which is something many people don’t want to give up. However, nothing good worth doing is going to come without sacrifice. So, do you feel up to the task? Are your ready to change one of the most potentially negative aspects of your life into one the best by changing your habits? Then, let's begin!
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Let us keep this simple today. Less hyperbole and more How To's and When To's. The first thing you'll need is an easy to use budgeting tool that is online. Additionally, you want it accessible on your computer and mobile as well. I have used EveryDollar for a year now. It is free, simple to use and while it does offer a paid version, I find I prefer to minimize unnecessary expenditures.
 
Once you have registered and set up your account for your budgeting app, and there are others besides EveryDollar, feel free to find the one that suits you best, you'll want to do the following:
 
  • Enter your income: You'll enter your 'Planned" income, which is what you expect to receive.
  • Enter your planned expenses: I start with the basics. Rent/Mortgage, Electricity, Gas.
  • Then follow the pre-entered categories like Transportation, (I add Fuel cost here.) and tolls if your commute requires them. Then move on to Food. I only put Groceries in this category, while I put dining out under Lifestyle
  • Then add everything else you have such as vehicle/home insurance, cable, cell phone, Netflix, etc.
  • Since this is what is called a Zero Dollar Budget, you'll see that, after entering your expected income and all expected and planned expenses, it will say at the top: $xxx.xx left to budget. This is money that is unaccounted for on the budget. Every dollar should have a home. If you're being smart, you'll put this amount into the Savings category. Then you'll see it indicates you've got a perfect zero dollar budget.
  • Pro Tip: Keep your savings completely separate from your checking account. To be more specific, not even at the same bank. I keep my savings/6 month emergency fund at Ally Bank. Ally Bank is online and their Savings account will earn you 2.0% interest, with no minimum deposits, account balances or fees. I highly recommend it.

 

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The Learning (Impulse Control) Curve

If you have never budgeted before, you may find that, at first, you are terrible at perfectly following your budget for any particular month you are in. You'll have something come up that you want or need and find yourself on Amazon, clicking that Submit Order button. I've been there. It took me three months to finally sort myself out and follow my budget as planned for each month.

If you have concurrent goals like I do, such as building a 6 month emergency fund, then you'll want to control your usual impulse buying. I like to institute the 72 hour rule. If I find myself desiring to buy something or sign up for a subscription to a service of some sort, I wait 3 days, no matter what. And most commonly, after I've waited for three days to pass, I'll often forget about what I wanted to purchase or find that I don't really NEED it and just WANTED it. Which is counter productive to the entire purpose of a budget. So don't beat yourself up if you find yourself adding additional line items to your budget the first few months and spending more than you planned.

It takes time to develop new (positive) habits and for them to cement themselves as the new normal. Additionally, it takes time to negate a bad habit in the same way. In the end, and sooner rather than later, you'll find that you are pleasantly surprised with how much money you're left with at the end of each month. Next up...Proof!

 

proof

 

Are You Serious??

This is an Excel shot I exported from EveryDollar. Again, this took time to work up to. Additionally, I am single with no children. I live in a small town and rent a cheap trailer. My vehicle is paid for and I am debt free. I also work from home and therefore have NO commute. This is an extreme example and I don't expect anyone outside my personal situation to consider this a reasonable expectation. But hey, crazier things have happened!

Everyone's personal circumstances are always unique in a million ways. But I hope this example provides hope that you can not only get a hold of your personal finances and spending, so that it's done in a responsible way, but that you can save up a 6 month emergency fund (6 months of living expenses, not 6 months of net income), but get that fund completed and start investing! If you want to fast track this journey of your own, I highly recommend you get The Total Money Makeover, by Dave Ramsey. It's an invaluable tool for all of this making sense, in step by step, easy to read manner.

As I always intended with this blog, I want to share this personal journey of mine to demonstrate that an average Joe, who isn't making a 'ton' of money, can still save and invest and know that my retirement won't be a Social Security nightmare, but, instead provide me with a retirement in dignity and self-reliance. And, at the end of the day, I wish this, and more, for all of you.

I welcome you all to join my financial blog and sign up at: Fight For Financial Independence.  I look forward to seeing you there and reading your comments!

 

Rob Loftus

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Original Post

We live on a strict budget but do use the credit cards for everything to get the cash back bonus each December. I have had to create a new budget column (Last August) for hospital parking for when we can't get the free parking on the street. I make a grocery list each month to do our big monthly shop & stick to the dollar amount, there are no extras, milk & produce is bought weekly after that with the remainder. The credit card is paid off in full each month. With the credit cards cash back bonus in Dec, I'm able to move some of my grocery budget to put extra in the retirement fund or splurge for a movie night over the holidays for my kids.  

I also enter contests to win 'experiences' around our city such as activities, events & movies tickets.  These events sometime have costs attached to them like transportation & parking, maybe a special snack.  I have a 'free money' account that I use to pay for these extras from money I win, money I find, surveys, etc.

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