Saving money has always been a fairly easy thing for me to do. Growing up, I always saved every penny I earned or received. When I’d go shopping with friends, nothing was good enough or worth spending my hard-earned money on, so I held onto it. This was very effective and allowed me to save thousands of dollars for college. However, now that I’m an adult, simply saving money isn’t enough. With bills and recurrent expenses, you can’t just never spend the money that you earn. This makes budgeting one of the most important things you can do for your family. The problem is, with all the financial info out there, it can be difficult to read, digest it, and figure out how you want to apply it to your own finances. If you’re new to the budgeting world, here is a simple guide to help you busy mommas get started!
Why should we budget?
Budgeting gives us a way to keep track of both how much we are earning, how much we are spending, and where we are spending it. Budgeting can also keep us out of unnecessary debt, or even help us pay off debts that we do have faster. Creating a budget and sticking to it allows us to reach financial goals and be in control of our money.
Why is budgeting difficult?
Even though I was great at saving as a kid, budgeting is not something I’m naturally gifted at. Budgeting has always been a struggle for me because I’m already so busy, and the thought of having to sit down and create a budget is the last thing I want to do. I think all of us moms (and dads) can relate. At the end of the day and the kids are in bed, it would be so much nicer to curl up with my favorite blanket, binge a show and drink some Dr. Pepper. However, I’ve come to learn that budgeting doesn’t have to consist of complicated spreadsheets and countless hours of analysis if you don’t want it to. No matter how you decide to budget, the act of doing so will give you the confidence that you are truly the one in control of your family's cash flow while also removing the guilt that comes when you spend it on things you’re wanting.
How do I start a Budget?
1. List your expenses and income
The first step is to figure out how much money you bring in (income) and spend (expenses) each month. Some expenses are fixed, such as mortgage/rent, while some things are more variable and shift from month to month. In order to figure this out, you will need to sit down and write out what expenses you personally have. To make this easier, divide them into 2 main categories: Recurring/regular and Variable/Standard expenses.
Recurring expenses include the following: Insurance, TV, phone, loans, subscriptions, utilities (garbage, gas, internet, electric, water, sewage). Depending on your situation you may have other items you’d like to include, such as monthly music lessons, daycare costs, school tuition, etc. These categories can be broken down even more if you prefer. For example, insurance will include life, homeowners/renters, car, medical. All of these fees occur on a monthly basis. Many of these will be a set cost, while some vary depending on usage. Include a set amount that you’d like to set aside for savings or an emergency fund. Emergency funds are essential. Everyone will have unexpected expenses at some point, so putting money aside for this is so important.
Varying expenses will shift more from month to month. However, it’s important to set a limit depending on your average cost in these areas from month to month otherwise you may find yourself spending too much. Here are some categories that you may want to include: (Kids' activities such as sports or dance, charities/donations, eating out, groceries, household products, clothing, date nights, holidays/birthdays, etc.) Even though you do not have birthdays or holidays every month, I like to include a little bit for this category each month because I don’t like to change my budget from month to month. Whatever I don’t use in any category can go directly into savings.
2. Find a budgeting method that works for you
There are countless budgeting methods. You will find that some methods work for other people that may not be efficient for you. Finding a budgeting technique that works for you may take some trial and error. Don’t be afraid to try several things if it’s not working well for you. And don’t give up! Here are some great budgeting methods you can start with:
Traditional: Traditional budgeting is simply tracking our income and expenses and watching the numbers to ensure we don’t go over what we have allotted for ourselves to spend. One way to do this is through use of a good old spreadsheet. Spreadsheets can be a great way to track everything. Creating a spreadsheet that is personalized to you may take some time at first, but once you’ve created it this is a great method for keeping you on track with your budget. If you don’t want to take the time to create your own, you can find great budgeting templates online. I personally use one made by Jordan Page from Fun Cheap or Free. You can also use an app to calculate and track your expenses for you. We always have our phones with us, and safe and secure apps can allow us to keep all of our spending and financial info in one place. A lot of apps will even do a spending analysis for you.
Envelope Method: Grab a stack of envelopes and write an expense category on each one. Then place the amount you’ve budgeted for that item directly in the envelope. This is a great way to ensure you don’t go over your allotted amount in the variable categories. Want to buy that cute new outfit you saw at The Baby Cubby? Open your “clothing” envelope. If you have enough cash in the envelope to cover the cost of the item you want, you know you are staying within your budget you’ve set for yourself in that category. This is a great way to help you feel in control of your spending because you can literally see how much you have left for the month in each envelope.
Be wary, though, of carrying around too much cash in your envelopes just in case you lose your purse or wallet. One way to help avoid this is to make four copies of the same expense envelope. Place ¼ of the budgeted amount for that category into each envelope and only carry one envelope with you per week. This can also help you so that you don’t spend all of your cash within the first week.
50/30/20: With this method, you will take the expenses you listed out for yourself in step 1 and split them into three categories: needs, wants, and savings. 50% of your income will be used to pay for your necessities, 30% for wants, and 20% for savings/emergency funds. Needs would be things such as mortgage/rent, insurance, and groceries. If you divide your income in half and notice that it isn’t covering your needs, you may want to evaluate your spending more closely to determine if they truly are needs or if there are things you can cut out.
3. Evaluate your budget often
This will ensure that you’re giving yourself a good amount in each category. You don’t want to consistently give yourself $500 for groceries if you really only need $300. That extra amount could be moved to another category. Evaluating your budget often will also help you determine if you are putting an excessive amount of money towards things that are unnecessary.
4. Modify your budget in order to reach your goals
We all have financial goals of some sort. Some may wish to have funds for their kids’ college tuitions. Some want to be able to take yearly vacations or invest in a larger home or newer car. For young couples finishing college or grad school, their goal may be to pay off student debt as quickly as possible. No matter what your goal is, format and adjust your budget around it. Your financial goals will most likely change with time, so make sure to adjust your budget to ensure you are setting aside the money to reach these goals.
5. Involve and discuss your budget with your spouse
Arguments about money are common in relationships. This is because many couples do not communicate effectively and honestly about spending habits and money management. Work together on creating a budget. You may disagree on some things, so compromise when you can. Men and women find different things essential. To avoid arguments, try adding a personal category to your budget. For example, you could give yourself and your spouse each $50 in the budget each month to use however. If I find a shirt I really want to buy, I can use my personal amount to purchase it. If my husband wants to spend his money on a new pair of shoes, he can spend it on that. No questions asked. This is a great way to allow yourselves to still get some fun things you may want without feeling guilty and reducing tension or conflict. Need more tips on how to talk about money with your spouse? Check out this article here.
Other Financial Tips:
Automate your money
As humans, we tend to have a lack of willpower--especially as it relates to investing time and energy into budgeting and saving money. If we have to put effort in, a lot of the time it won’t happen. By automating both our expenses and savings, we can be sure that money goes where it needs to. This keeps us from making the bad decision to use our money on unnecessary items when that money should really be going straight to our savings account. Having money go automatically to our bills or savings accounts doesn’t give us that chance to spend it in other ways. (If you haven’t read it already, make sure to check out the book The Automatic Millionaire. This book is a great resource for those that would like to learn more about managing money.)
Remove unnecessary spending
Everyone has something they waste money on. Even if you feel like you are a frugal person, there is most likely something you can cut out. It’s ok to splurge every once and a while, but make sure it’s within the bounds you’ve set for yourself.
Learn to say no
If you’ve hit the limit in any given category, just say no. Even if something is a great deal, sometimes you need to just say no in order to avoid unnecessary debt. Try to remind yourself daily of your financial goals. One way to do this is creating a vision board. Place it in your house where you can see it daily. That way, when you are out and about, you will be less likely to make small purchases here and there that will keep you from your ultimate financial goals.
Don’t sign up for every store credit card
Almost every store these days has a credit card. It can be extremely tempting to sign up for them all, but this can quickly get you into a hole you can’t get out of. Keep things simple with just one or two credit cards. This has been one of the best things I’ve done for myself. For several years I only had one credit card. With all of my spending in one place, it made it easier for me to see when I needed to pull back on my spending. This also made it easier for me to ensure I had the funds to pay the full balance off from month to month.
Make a list when shopping
This is a great way to ensure you only buy the things you need. One of my biggest problems is going to the grocery store without a list. I tend to wander down every aisle. This leads to more items in my cart, many of which I do not need. If this is you, be sure to check out our article about how to save money when grocery shopping.
Take an online class
A few years ago I took a budgeting class from Jordan Page called the Budget Boot Camp. It’s a great class for teaching you everything you need to know about budgeting and finances.
Everyone has a different relationship with money. Some people grow to despise money because it causes stress, anxiety, and contention. This can negatively affect your family life and relationships, demonstrated by the countless studies showing money as a leading cause of divorce. But this doesn’t have to be the case. By following simple guidelines, you can take control of your life and your finances, providing you with the peace of mind that you need to move forward and achieve your goals together.
For more tips, visit our blog at babycubby.com