I 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.
The Power of Writing It Down. Or, how I learned to keep a budget
March 6th, 2009 at 06:28 pm
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No doubt about it! Especially on things like Utilities where it's just free money in my pocket.
Another really big advantage is now, looking back, I have 3 years of historical data. I can see the affect gas prices had on my budget in 2008, I can see how my budget changed when my girlfriend moved in with me, etc. Very cool!
March 8th, 2009 at 03:06 pm 1236524780