The foundation stone to a frugal life, to a healthy homestead, is the budget. There’s no way around it. It’s not fun, it’s not glamourous, and honestly, it’s kind of a bummer. When beginning, budgeting is tedious and a chore. It’s not fun because you have to train yourself to go from a life of consumerism, one that has a constant barrage of “buy me” tactics to one of discipline and thrift. Be gentle with yourself, this is a task that takes years to master, and even then, the temptation is always there when you enter a store or are too tired to cook that meal. I promise, the more you learn, the more you save, the easier it becomes, and for some – ah hem, the more enjoyable the task becomes.
There are three basic steps to basic budgeting: figuring it out, writing it down, and doing it. Easy right? Below I will go through each step.
Figuring it out.
Honestly, this is probably the hardest part for those just learning to budget. We aren’t born knowing how to budget, and unfortunately budgeting 101 isn’t a course in high school. The best advice I can offer is to find a financial guide. Find someone you can learn from. It doesn’t matter who, they all say the same thing. I don’t care if you are male/female, conservative, liberal, feminist, a person of color – I promise, I follow them all. Find one you like, follow their social media and read their books, watch their clips or videos. And please, don’t spend money on their marketing ploys, because yes, even the financial coaches are trying to sell you something. For the most part, you can get their books from the local library, book swaps, and find free videos on YouTube so you don’t have to spend a dime. Learn from them, grow from them, and then look for others.
Personally, I started with the budgeting guru, Dave Ramsey. The most important thing about Dave is that he is accessible. I didn’t buy a thing from him, I explored his website and checked out books from the library. What I wanted was a guide, someone with a simple proven plan and he had it. I used and modified what I needed to make my budget, ignored the things I knew were not helpful for me personally, and followed a plan. These financial coaches won’t make you rich, or tell you complex financial advice. What they do provide is a simple way to modify behaviors, because at the root of most financial issues is poor behaviors that need to be unlearned.
Write it down.
The first month of learning how to budget is less about budgeting and more about setting your financial framework. There are a few things you should start with – figuring out what your income is, figuring out what your bills and expenses are, and figuring out how much you actually spend in a set period of time. The first month in particular – “write it down”. I wouldn’t try to drastically change behaviors; it is more important to gauge where you are and where you need to be. You need to know what you spend. Why? Because we unknowingly spend so much money on crap we don’t even realize. That coffee, that trip to the store for a couple of things, dinner out, etc. We are programmed from childhood that spending makes us feel better, that we NEED whatever it is, but for the most part we probably don’t. It’s about immediate gratification and the endorphins we receive. We can change behaviors, but we need to first know what those behaviors are to change them.
I have used a variety of methods to track my budget and spending over the years, but for the most part I use paper and pen and a few spreadsheets. There are several apps out there. My favorite so far has been Rocket Money – but most budgeting apps require a subscription and aren’t “exactly” what I need so I have never use them longer than the trial period. They may be a good starting point, specifically because they link to your bank account and credit account and do most of the tracking legwork for you. My best advice is to keep it simple as possible. The more complex you make it, the more work you have to put into it. Do you really need 17 different cash envelopes for every category in your life? Probably not. Remember, some things are useful, and some things are gimmicks to sell a product. Figure out what works best for you.
It is important to set your financial framework time period to one that mimics your pay, and because there varying pay schedules, most are bi-weekly, but there are many people that get paid daily, weekly or monthly, I cannot specify which cycle would work best for you. What is important is that you build your budget around your pay/bill cycle. I personally created my own template to track my pay/bill cycle which ends up being a modified monthly budget, with a bi-weekly payment cycle. Essentially, you need to include how much you earn, how much your bills, debts and expenditures are, and where to put any extra funds. The goal is to track every dollar earned and assign it to a specific task in your budget. If you’re in debt, then beyond covering basic living necessities, the goal is to put any extra money toward building a small emergency fund to help in a pinch and then focus on paying off that debt. As you move forward in building your financial stability, you move from paying off debt to building savings while learning and developing new financial skills along the way.
Your budget framework needs to be laid out, planned and referenced frequently. Each year I lay out my budget book for each month, I know what my recurrent monthly bills are, and I know what months I have additional bills (think car insurance – I pay every 6 months). Routine bills fall at the same time every month, so nothing is a surprise if you plan your pay around your bills. Realistically, most budget expenses can be planned out ahead of time and saved for. For example, I know every spring break my husband and son go on a trip, so I save accordingly. What typically isn’t planned for are car repairs, health emergencies, and similar things but you should plan to save as well. Savings should be considered one of you monthly routine “bills”. If you think of savings as a bill you need to pay instead of something that can be pushed off because it is extra money, by the time you actually need to use the savings there will be money saved up.
Since my budget planner is made out at the beginning of the year each month is already set with my routine bills and expected bills. During the planning stage I include several extra lines where I can add “unexpected” bills for that month that I include when budgeting for the month. Early on I found that trying to pay all bills at one time left me with half my month broke and the other half with plenty. I found that separating my bills into two sections based on my pay schedule balanced my expenditures and hurt much less. I was even able to break my mortgage into bi-weekly payments to make my largest bill smaller and therefore more manageable. A positive benefit of bi-weekly mortgage payments is that you end up paying a whole extra payment a year which can shave years off your mortgage.
This first month is also a good time to dream and develop a couple of yearly goals and a broader 5-year goal. What are your goals, and where do you want to be? Set small goals at first and broader more complex goals as your skills develop. Running blindly into a strict budget will be painful and can leave you feeling disheartened and frustrated if you don’t have something that you are working towards. Think of setting these goals as your financial vision board for your future.
Doing It
Once you have a financial guide and a financial framework in place it is time to put your plan into action. As I said before this will, for most people, be painful-especially at first. Budgeting is about changing learned behaviors and developing new ones. It takes roughly 66 days to break a learned behavior, and about the same amount of time to develop one. However, the more complex the habit, the longer it may take—some studies estimate it can take up to 254 days. 254 days is just over 8 months, so don’t be too discouraged if you don’t become an expert at budgeting in two short months. The reality is, it will probably be closer to a year before you fully have the swing of it. Give yourself plenty grace, allowing for setbacks – because at they are inevitable, and learn to overcome challenges instead of being completely side railed by them. Set small goals at first gradually working towards larger ones. Don’t be surprised how much you accomplish in a years’ time by meeting small goals.
It is the budget that shows you whether you need to save or whether you need to get another job. Without this basic knowledge you have no real idea where you are financially. This may work for you, but for most, at some point in life we come to realize that we may have too much debt, too little savings, or are faced with a major financial event such as a child going to college or retirement. We realize too late that we are not prepared. Statistics back this up, only 1 in 5 Gen Z are saving for retirement and a growing number don’t expect to ever fully retire. Millennials are facing a similar financial uncertainty with high levels of student loan debt, rising costs of housing and what seems like round after round of economic recessions. With advanced planning and steady budgeting, you have the ability to control and change your financial future.
As I move forward with posting I plan revisit budgeting many times over. I hope to be able to provide tools and resources for those looking to learn. I plan to include downloadable PDF budgeting templates in the future, in my resources section, of what my own monthly budget outline looks like.
The Roost & Rabbitry 