Budgeting. For some, it’s a negative word and a discomforting concept. I’ve been budgeting for years, and at first, it was something I was scared of. It meant that I would have to face all the bills and debts, and I’d have to answer some what if questions. What if we didn’t have enough income to cover expenses? What if our debt was sinking us? What if we weren’t saving enough? It’s uncomfortable to face the prospect that we may not have enough money to pay the bills, but if we continue to ignore it, it won’t get any better. Over time, as budgeting became a part of my routine, I became comfortable with it, and I even began to enjoy it, so much so that I pursued a B.S. in Finance with an emphasis in financial planning. The biggest benefit to budgeting is that it helps us understand where our money is coming from, where it is going, and how to make it work for us. No matter our financial situation, a budget can help us answer those questions and help us create a plan to tackle financial challenges. Here are five ways that I have strengthened my budget over the years.
1. Record it.
First, write it down or type it out. At first, I relied on memory, especially for due dates, and I found out rather quickly that it does not work for me. Record your due dates and your minimums as soon as you get the statement. If you can set up auto-pay, do so, then record the date the payment will be taken, and continue to record the amount, especially if it’s not a fixed amount. This can help you avoid surprises when logging into your bank account, as you’ll know what’s coming out and when.
I’ve used various planning methods over the years. I prefer to write down my financials because digital ones run the risk of being breached or disappearing. I am currently planning to add a digital version that I will save to my computer and not through the cloud, which will also be backed up. Right now, I’m using the A5 Budget Planner from Erin Condren. I have an affiliate link if you’re interested in trying this planner out for yourself. The link gives you $10 off your first order (when you sign up and make your first purchase), and yes, it’ll give me a $10 gift card. However, a regular old notebook from Dollar General, Five Below, or Walmart works just fine. Whatever you do, it needs to work for you.
2. Track variable spending
Variable spending can be dangerous. I grew up in a financially unstable household where food wasn’t always available, and I had hand-me-downs from secondhand shops. As an adult, this led me to impulsively spend on fun stuff and takeout. This didn’t just lead to financial issues, but health issues as well. Tracking your variable spending can give you insight to your relationship with money and how your past can influence your financial behavior. Knowledge is power. Write down every transaction, categorize it, and if you suspect that you may be dealing with things that cause impulse spending, write down how you are feeling when you make that purchase. Were you scared or angry, but felt better after buying something nice online? It may be that spending is how you’re coping with something.
3. Audit your subscriptions
Subscriptions are probably one of the biggest issues that people run into in their budgeting. That is why there are a lot of services out there that track your subscriptions and offer to do cancellations for you. I’m not a fan, because I would be delegating something I should be doing to another service, which I think perpetuates the “out of sight, out of mind” problem. These apps and services are great tools, but should not completely take it over. You should always be aware of your own budget. MMO subscriptions were always a problem for me. I would pay every month for it and forget to cancel if I stopped playing. Just imagine how much money companies make from you simply forgetting to cancel something you’ve stopped using. Yeesh.
I recommend auditing your subscription plans every month if you can, but every quarter at most. Don’t go longer. Calculate how much you’re paying for streaming, for gaming subscriptions, your subscription boxes, etc. Then do some prioritization. What are you using the most? Have you stopped using one of them? Then consider how you want to pay for what you’re wanting to keep. Some have annual plans, some have student plans, so match your payment with your habit. If your whole family watches Disney+ every single day of the year, their annual plan is probably worth investing in (even though it’s becoming expensive as all get out). But if you only watch one show on Starz and it’s on hiatus, pause the sub, and don’t accept the deal they try to offer unless you’re willing to use the app more. Remember, they’re banking on you forgetting. Literally.
4. Track bill trends
Many things are currently on the rise, such as grocery and fuel costs. While tracking variables and subscriptions are important, it’s also important to note trends in your bills, such as utilities. Currently, our electric bill is on the rise despite our usage remaining the same, and we live in an area that is constructing more data centers. With inflation and everything else, awareness is key to heading off some financial issues. Consider whether budget billing for utilities is something worth doing. And of course, if you are seeing your electric bill rise, make sure you are turning off things when not in use, examine the bill to see your usage, and also see if there have been any changes to your rates. Talk to your provider and see if you can find out why changes are happening. I track all my categories month to month, and I do comparisons between the current month and the previous to understand if we are spending more.
5. Categorize your budget
Categorizing my budget was one of the most helpful things I did. At first, my budget was a jumbled mess and made little since. Now, it’s color-coded and organized so I can see trends, identify overspending, and improve my budgeting. Some categories I have include bills (utilities, cell phones, internet, subscriptions, anything coming out monthly on a due date), transportation (fuel, car washes, oil changes), medical (copays and prescription costs), groceries, and fun (games, movies).
I hope you found something useful out of this post. This will not be the last time I talk about financial topics. I hope to give you a tour through a digital budget at some point in the future, and I’m also hoping to discuss sinking funds and debt payoff strategies, so stay tuned. Take care of yourself.
-M.