What Can I Do To Make Budgeting Easier?
When I talk about budgeting with people, my main takeaway is that hardly anyone actually does a budget. If they actually do a budget, it’s usually a wishful budget that isn’t actually happening. Or perhaps it’s the recording of expenses that have already happened. A real budget serves as a plan for how to spend money during the month, and then a system for helping make that plan actually happen. Wouldn’t that be great if that happened for you? Then you can make sure that your money is spent on the things that are important to you, instead of being spent on, well, who knows what.
Once people do start creating a real budget, it often becomes a challenging endeavor that requires a lot of management and tracking. It need not be that way. There are several ways that we can make budgeting easier. We make it easier by having a system that we put together to more easily track our spending & compare it to our planned budget. Here are a few things we can do to make things easier. If you see one or two ideas that will help you, then great!
1.) Use Cash for variable expenses like groceries and eating out. Who uses cash these days? Maybe our grandparents? Well, that’s not exactly right. A lot of people have started to use cash because of the many benefits of doing so. When we use cash, we’re more aware of how much we’re spending. When we swipe, we have little awareness of how much we spend, which can lead to overspending. People who use cash, often spend about 10% less than those using cards. Why? We’re less like to impulse buy when we have to peel off extra 20s at the cash register. We’re more likely to comparison shop & only buy the things we need. But there’s even a bigger benefit to using cash! If we budget $1000/month on groceries, for example, that’s $250/week. If we take out that $250 each week in cash, and use only that cash for groceries, we won’t ever spend more than we budgeted. We don’t need to keep receipts. We don’t need to add up the debits from our online bank account. We don’t need to pay an extra credit card bill, which may be charging interest. We just need to stick to the $250 cash we have available for groceries each week & we hit our budget every time. The bottom line is that the more categories we have where we use cash, the easier it will be to stick to stick to our budget & make it work.
2.) Look for ways to make our variable expenses more predictable. We have a lot of fixed expenses like our mortgage, our auto insurance, our internet bill etc. We have other expenses that don’t vary a lot such as our water & sewer bills. But we have other expenses that vary a lot. Some of them can be handled by using cash, as noted above. But there are others like our electric or natural gas bills that can vary a lot each month. Many electric & natural gas providers provide a service called “Level-Pay” or “Budget Billing”. They average out our expected bills for the year and divide by 12. So, we pay the same amount each month for the full year. After a year, there’s an adjustment & we simply incorporate that adjustment into our budget at that time. All it takes is a phone call or, sometimes, an online signup. Just like that, we don’t have to predict the weather and its impact on our budget! One caveat is that if you’re not planning on being in the same location for a full year, it might not be a good idea to sign up for this service. While things will generally average out over the year, if you leave before the year & the high-cost months haven’t averaged out, you will owe money on the balance.
3.) Try a budget app. For those who like using apps, and especially for those not willing to try using cash, a budget app might be the way to go. Budget apps can be tied to our bank accounts & can automatically import our income and expenses into the app. The app will recognize many transactions and will automatically categorize them for us. For categories it doesn’t handle correctly, we can setup rules so that they will categorize them correctly in the future. The key then, is that we actually check our budget app before spending to make sure we know how much money we have available to spend. When we use our debit cards, it’s really surprising how many transactions pile up each month. That can make it too difficult to manually track them without an app. I recommend apps like YNAB (You Need a Budget), Mint and EveryDollar. We just setup our budget each month and the app tracks our actual income and spending. We just need to do our part & pay attention to how much is left before we spend. YNAB is particularly good in that we plan out the month, and then as income comes in, we allocate it to our specific categories before we spend it. That way we don’t theoretically setup a budget and pay for something when we don’t actually have the money in our account.
Many people struggle to simplify their budgets and make it work as planned. It can be especially challenging for spouses who are not on the same page. If you need help with your budgeting, and your personal finances overall, you can setup a Complementary Consultation with me by clicking here. We’ll spend some time together, I’ll ask you some questions, and we’ll determine if financial coaching is a fit.
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