The Power of Writing It Down. Or, how I learned to keep a budget
March 6th, 2009 at 06:28 pmI began keeping a budget 3 years ago, shortly after I started my career and began living on my own for the first time.
Primarily it was about necessity: I lived with roommates at school but this was something entirely different. My financial life became much more complex. I had utilities and rent, I had to furnish the place, I had the epiphany that everything--from toilet paper to garbage bags--had to be bought. By me.
So I opened Excel. If you're kind you'd call my budget "optimistic." A better word would be "fiction."
I refined it over the next few months, allocating, adjusting, and before long I had something that seemed realistic. I was proud of myself. I felt responsible.
A month later, my savings was a nice, round number: $0.
Only then did I learn that making a budget is easy. I could make 5 of them on a Saturday before the first kickoff. Keeping a budget, THAT was the hard part.
So I opened Excel and turned my budget into a living document. One tab for each month. A section to record each expense, and a report that tracks the spending across categories. Simple and effective for my needs.
It took a couple months for me to discipline myself into writing everything down. Some things I just couldn't stand to see in black & white.
But I made it a habit. Every night I'd return home, open the spreadsheet, and record every dime I'd spent.
My expense:income ratio made it easy to over-spend. I was never at risk of not making rent or my car payment. It was about whether or not I'd have anything left-over for savings at the end of the month. And from this simple act of writing EVERYTHING down came the "consequence" I needed to control my spending.
"Do I really want to go home and write this down" became the first thought going through my head when I was tempted to spend.
I've distilled this experience into 2 suggestions to anybody struggling to keep a budget:
Be Realistic
Take my current budget as outlined in my last post. I could budget $100 for entertainment. I could double my debt-reduction.
But i know myself. I know I'm young and moderately successful for my age and I like to go out and have dinner with my girlfriend. And I know that I could save nothing and pay my debts down in a few months but I like the feeling of cash on hand. By knowing my own spending habits I can constrain them without resenting my budget and feeling joyless.
Write It Down
This was the secret to my budgeting success at a time in my life when most my friends considered a bottle of Grey Goose a Liquid Asset.
This simple act of accounting for my own spending at the end of the day was the missing piece of my puzzle.