Budgeting: A Path, Not a Cage

*This is a guest post contributed by Catherine Hershey.

Budgeting, much like exercising, only works if you have a clear and realistic path to success. This includes pushing your comfort zone while keeping up some of the things you rely on to ensure you follow-through. It is not responsible to expect yourself to transform from being a spending junkie or a Starbucks addict to a minimalist budgeting angel of peace in one day. It is a process which must start right now, right where we are. It is easy to put things off to the non-existent future saying “after the house is remodeled, then I will be stingy” or “After all my maid of honor duties are over, then I will spend only on necessary things” or “I’m just really having a bad day, I need a shopping spree and a night out. After today I won’t spend money”. Celebrating milestones, making your home comfortable and inviting, or pouring your creative mind into hobbies and passions, are all things that are important and worthy of your hard earned money on. My husband and I both have hobbies and interests which require a bit of spending. Instead of cutting these things out in the interest of saving money, our hobbies serve to fuel our motivation for cutting back the unnecessary spending. In order to make room for the fun things, it is important to have a tight hold on the every day expenses. But taking control does not happen overnight. It requires a path that will lead you on a fulfilling life-changing journey, one step at a time.

STEP 1: TRACK EVERY DOLLAR

Before you can figure out exactly how much life costs you and how much money is wasted, you need a visual representation of all the incoming and outgoing money. In our house, we have a large white board in a visible (yet private) area on which we have listed our spending in categories: Bills, Grocery, Eating Out, Car, Cash, Other. You may also consider adding categories such as Entertainment, Household, Travel, etc. At the bottom of the column we have written the total amount spent, the total amount earned, and the Margin (or difference) between the two. Every Friday, I pull up our bank statement on the computer and write down each transaction in a notebook in the appropriate column, then and update the whiteboard with the totals. At the end of each month, we input the totals into an excel sheet which tracks our averages in each category as well as the total amount earned and spent for the year.
This may seem like unnecessary work considering the existence of banking apps such as Mint that can do this for you. But I find that physically writing each one down helps me to feel like I have more control and more understanding of our current situation. Furthermore, doing this once a week, rather than seeing it every day on my phone, helps me to not obsess and stress over it.

Once you have a clear idea of where the money is going, you can see where spending can be trimmed, which brings us to step two.

STEP 2: IDENTIFY OVERSPENDING AND PROBLEM SOLVE

It is time to examine each column and determine whether there is unnecessary spending going on. For instance, our grocery bill was high for several months in a row. So I decided to get better at cooking and meal planning. My goal was to have 30 good recipes that everyone liked so I wouldn’t have to repeat any and we wouldn’t get sick of them. At the beginning of our marriage, I knew how to make three things. Every week I would try a new recipe (from the internet, or one of the cookbooks I have). Some were terrible and some required a few tries to get right, but we eventually found some keepers and my list steadily grew. Now, I am able to sit down and put together a whole meal plan once a week (accounting for our lunches and the kids’ snacks) and our grocery spending has become more consistent and steady. More importantly, the practice of trying a new recipe every week has become a habit which is steadily making me a better cook and our mealtimes are becoming more diverse and enjoyable. Hint hint: the commissary is a great place to find new ingredients for those diverse, cultural recipes you want to try!

Moving on to the next category, our Eating Out spending was high for several months in a row because my husband was eating out for lunch most days during the week. With some experimentation and creative thinking we finally figured out what kind of lunch I could send to work with him that would be appropriate for the kind of job he was doing and how much time he had for lunch. This saves us on average $50/week.

I did however notice there were still many Starbucks transactions, adding up to about $60/month. This was partly because my husband left for work at 6am every morning and partly because there was a Starbucks near the playground where I frequently took the kids for play dates. We solved this problem by setting the coffee maker every night to turn on at 5:30am the next day, picking up a flavored coffee creamer, and buying a $30 cold brewer. This way we always have several varieties of coffee available to us and are able to take a mug or thermos full when we leave the house. Our Starbucks spending went down to about $10/month.

We believe that budgeting is about problem solving and will take time. It should be treated as a life changing journey with some give and take. Some months you will be right where you need to be, some months you will drop the ball. Those months shouldn’t be discouraging, but a chance to learn what you can do better next time.  You can’t learn to be a good cook in one day, but if you try something new every week you will soon have a months worth of good recipes which will keep you from getting bored and eating out.

STEP 3: SET GOALS

The fun thing about budgeting is there is no set amount that you should be spending in each category, that is totally determined by you. Combing through our lifestyle habits and finding where spending can be trimmed is an exercise that requires a lot of humility and self honesty.

But without something driving you to cut back the extra spending, you will continue bad habits and drown in guilt. This is why it is important to have long-term goals as well as monthly budget goals. Most of us have some sort of debt and this is a good motivator to cut back on spending. When you have figured out how much your spending can be cut down month to month, make big goals for putting that money towards paying off your debt and saving for your future. Because of the lifestyle changes I mentioned above, we were able to pay off our 6-year car loan in 3 years, and cut my student loans in half in 2 years. This kind of success is empowering! Once you achieve one of your goals it becomes easier to conceive the kind of future you want and draft the steps you need to take to get there.

Budgeting needs to be revised for the 21st century. The methods that our parents used are out of date and need some revamping. The envelopes full of money method is no longer effective, as most of our financial transactions are digital. It is time to embrace a journey of honest change rather than simply putting a cage around our money.