Can you believe we’ve been doing this for over two months? It just doesn’t seem possible. I’m starting to feel like time has a really weird feel right now.
For some people, not having a schedule is throwing their life into chaos. For Katie and I, the schedule of our small kids feels like an unrelenting march that won’t stop.
Katie and I are lucky though. As teachers, we still have our jobs and are getting paid. But I know that this isn’t everyone, which can make for some really scary times.
The uncertainty of what’s going on reminds us how important it is to have have a budget and to be intentional with our money.
But even if you aren’t facing financial hardship right now, the reminder of how important it is to have your financial house in order is welcome.
So if you’re feeling like you need to do a better job of managing your finances, or if you’re feeling like you need to get back in the saddle after falling off the horse, it’s a great time to start budgeting again.
For the next several weeks, I’m going to be dealing with topics around getting a budget off the ground.
I’d like to invite you to come along.
Choosing a Budgeting Method
So choosing a budgeting method is one of those places where it’d be really easy to get stuck.
I wrote back in march how I was frozen with indecision about which running app to use when I started back up with my running. What was crazy is that I seemed to be more concerned with what app I was going to use to track my perfect metrics than with actually running.
The funny part is that my running was terrible again. I had gotten into a good running habit but had dropped off. Now that I was starting back at zero, my running was terrible, of course.
All of this is totally fine. I wasn’t worried about starting back at the beginning. But it’s funny the amount of time I was spending looking at tracking apps vs. just running. I say this to illustrate that sometimes we get so caught up in worrying about making the perfect choice, that we fail to make progress forward.
I don’t want that to happen to you when you select a tool to budget. My guess is that you’ve either used a budgeting app like Mint in the past, or you’ve at least heard a recommendation from a friend.
There are more than one great choice out there for budgeting, but I do think there is one that is the best.
My choice for budgeting is an easy one. You Need A Budget(or YNAB for short) is definitely my favorite choice for budgeting. I wrote about why here, and here.
But if you have another way you’d like to budget, that’s totally fine. The point is that you choose and move on.
Name Your Categories
It’s time to sort all of your expenses into categories.
First, I want you to think of all of your expenses that you have in a month. Word of warning: This could get overwhelming. Don’t let it. Take 20 minutes and go through your last bank statement to write down every category of purchase you made last month.
If you miss one, which would be really easy to do, don’t worry about it. You’ll simply add it to your budget and move on.
If you get started with YNAB, they’ll offer a default set of categories that will help get the juices flowing about what categories you should be including.
Then, as you’re looking at all of those categories, I think it’s helpful to think of the big buckets you want your money to fit in to.
YNAB will have some, but here are mine. We split our money into these big buckets, or Category Groups:
- Just for Fun(this is all wants: dining out, spending money)
- Needs(These amounts can look different every month but are needs for us: groceries, gas, household expenses)
- Immediate Obligations(Mortgage, fixed bills, utilities)
- True Expenses(The term YNAB came up with to refer to spending that happens predictably, but inconsistently. An example would be an insurance premium that only comes up once a year)
- Giving
- Saving
You may think of other ways to sort your spending in category groups, which is great. But hopefully this will get your mind thinking about how you’ll want to sort your spending.
Assign Those Dollars
After you’ve taken the time to lay out the categories that you’ll be putting money in this month, it’s time to assign those dollars.
Here, you want to do what’s called a zero based budget. This means that you assign every single dollar to a job.
Don’t allow yourself to think, “Ok, now I’ve got $200 left over.” You want to assign that $200 or you’ll find that it disappears on you. It will just be spent on something that doesn’t matter.
If you’re wanting to save that $200 on a friendcation trip, then you need to assign those dollars to a vacation fund.
That way, when you’re tempted to go over your food budget, you’ll look at your budget and remember that you’ve got that trip to save for, and decide to skip the overspending.
Recording as You Go
Lastly, it’s time to record as you go.
I can’t stress this enough, recording transactions on the fly is the absolute best way to stay connected with what’s going on in your budget.
If you simply want to track what you’ve already spent, you’ll be surprised every month.
But if you’re intentional with checking that budget on your phone before every purchase, you’ll be in charge of where your money is going.
So in YNAB, you enter your transaction on the go, and you immediately see an updated balance for your category. Then, when that transaction clears your bank, you have the option to match that transaction with import.
Of course, the other great thing about import is that any transactions you miss will import as well. It will happen, you’ll just miss recording something on the fly and then when that transaction imports, you’ll be able to categorize it and add it in to your budget.
A Good Reminder but Always a Good Idea
So if you haven’t been a good budgeter, take this opportunity to start again.
It is so important that you always have a budget, not just when you’re afraid financial disaster could strike, but in normal times as well.
The important thing is to take action.
If you’re interested in checking out YNAB for your budget, you can check them out here. But whatever method for budgeting you choose, get going.
Next week, we’ll talk about why you aren’t going to get it right the first time, why that’s ok, and why you need to keep going.
For this week, I really want to challenge you to get started with a budget.
- Get signed up.
- Set a first draft of category balances(this doesn’t have to be perfect)
- Assign your dollars jobs.
And I’ll be back next week to talk about why taking action beats being perfect.
Jared
P.S. What frustrates you about budgeting? Let me know down in the comments.
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