For this post we’re getting back to basics. Today’s topic is one that many of you may already understand. While Johnny and I are fortunate enough to be out of debt, we realize debt is a reality for many. And so we’d like to share one of the tools that helped us slay the Debt Monster.
Today’s Back to Basics post goes back to the most basic of basics of basics: budgeting. If I asked 10 random people on the street whether they budget, I’d guess that 9 out of 10 would say, “Yes.” My follow-up question would probably be, “And how do you budget?” To which they’d say, “I watch what I spend.” “And how do you watch your spending?” “Oh, you know. If something is too expensive, I don’t buy it.” “And how do you decide if something’s too expensive?” To which I’d hope to hear, “Well, we have a budget. And we know exactly what we can afford to spend on specific items while still saving money each month.” And I’d say, “Good boy/girl. Go play.”
Ugh, I really didn’t like myself in that hypothetical scenario. Did I sound kind of like a bossy school teacher to you? I think it’s time to get out of the hypothetical. And play a game:
Two Truths and a Lie
Truth: Budgets are a pain. They’re wretched, fun-killing demons. But they’re also the way to financial happiness. And unless you’re rolling in the dough, itemized budgets are the way to go. Otherwise, there’s no way to keep an optimal saving and spending balance.
Lie: I can keep track of my spending in my in my head. Noooo. I know this is a lie because it’s one I’ve told myself. Unless you are a calculator — and I’m strictly speaking of a plastic square with buttons and a screen — you can’t do this.
Here’s an example: On Saturday, the first day of June, Johnny and I began our new monthly budget. On that day, I ordered $47 worth of diapers, Johnny filled up our car with $35 of gas, I bought a $20 gift card for a baby shower, and we bought $17 in groceries. That was day one. And we have 29 more days of similar spending situations. And add recurring expenses such as rent and utilities to the mix. There’s so much involved in a month’s time that guesstimating just doesn’t cut it. Time and again when Johnny and I haven’t recorded our spending, we’ve had scenarios such as this (back to the hypothetical… bear with me):
“I think we did good on spending this month.”
“Yes. Definitely. We barely spent anything.”
An hour later…
“So I just calculated everything, and somehow we overspent on food. And clothes. And entertainment.”
“Really??… Oh yeah… we did go out to eat with the So-n-So’s. And I got that dress I’ve been wanting for so long. And…”
You get the idea. A month is a long time, and one extra expense here and there adds up no matter how much you think you’re mentally keeping track. Which brings me to my other truth:
Truth: Budgeting needs to happen in real time. Calculating every expense at the end of the month doesn’t help. The damage has been done. And while it’s good to know where you stand on the last day of every month, it’s better to know where you stand each and every day, while you can still decide how your month will end up.
A Few Last Thoughts
- If you haven’t been keeping a budget, it should make you feel a little bit claustrophobic in the beginning. It shouldn’t suffocate you, but you should feel like you’re restraining yourself at times during the month. While it may be uncomfortable initially, ultimately you will have much more financial freedom and peace.
- If you think your money is already too tight for a budget, that is all the more reason to have one. You have more cause than anyone to know where every cent is going. And I could very well be wrong, but you might find a few areas you can slash. Even if it just comes to saving $50 in a given month, it’s worth it.
Budgeting is exhausting. And talking about it is even more exhausting, amiright? So we’re gonna revisit this topic in a few days, and next time discuss how to actually get that freaking budget started. Rest up until then!
UPDATE: Who needs rest? Go check out How to Start a Budget: Part II right now!