The Best Budget System For You

Finding a budget system that fits your family’s needs is comparable to finding the right pair of shoes. There are a lot of really good products out there, but your needs are specific to you.  The right shoe for your neighbor might not fit you properly, and the right budget for you may be completely different than your friend’s.  So how do you find a budget that fits your needs, is easy to use, and helps you to accomplish your financial goals?

This process is actually a lot like our shoe buying example, you might have to try a few on for size to see what works. A paper budget is a great way to see how your finances will perform over a span of time.  But it doesn’t work so well for knowing where you are day to day.  An app on your phone works great for tracking everday expenses, and it’s really useful if you and your significant other are synced so that you both know where your finances are at any given time.  But it’s a little more difficult to see your progress over time.  You might want to use a combination of methods.

There are a multitude of different types of “cash systems”, where you have a certain amount of cash set aside for each budget category. I like using cash because when it’s gone, it’s gone.  Cash gives you a better sense of how much money you can still spend, and it is easier to stick to your hard budget limits, as opposed to swiping your debit card.  It’s also really easy to underestimate your spending when you are swiping your card and keeping a tally in your head.  I like the small notebooks that have space for cash, they don’t take a lot of room and are a little easier to use, especially if you’re lugging groceries and a toddler around.  But you can simply make your own envelopes as well; look at your options and see what feels the most comfortable.

Even if you are using cash, it helps to have at least an app where you can get a quick visual on where your spending is at an any given moment. And of course, you and your spouse can both know where your finances are at, because living by a budget and becoming debt free is a team sport.  My suggestion is to download a free app that is seems like it will fit your needs.  Don’t buy an app at this point because we are still “trying on”.  Even if you find one that you love, I would try to stick with free.  Often the upgrade you get by buying isn’t something that you really need, and remember, we are trying to pay off our cars, credit cards, student loans, homes, etc. and we need to save money everywhere we can, so if you can get by with the free version, do it.

I would also suggest having some kind of budget that gives you a long term outlook. You can either do this in Excel or another spreadsheet type program, or if you already have something like Quicken you can use it.  Again, try to use what is free because we are saving money.  Even a sheet of notebook paper will work.  Try not to make this overly complicated or you will spend a lot of time setting up something that you won’t use.  It should be fairly basic and simple, with your monthly expenses, along with a list of what you are paying off.  What this extended budget will do is give you a visual of your debts being paid down, and seeing this progress helps you stay motivated over time.  And let’s face it, it can be hard to stay motivated in the beginning.

Remember to keep a long term outlook

 

Remember, try some different methods out, and don’t be afraid to discard what isn’t working for you. The only way you are going to be able to use your budget as an effective tool is if it is handy and convenient for you.  Just jump in there and get started!

 

How to Become a Millionaire (or How to Own Your Adventure)

Who wants to be a millionaire? Or a better question is, who doesn’t?  Do we need to have a million dollars to be happy?  Probably not, although it wouldn’t hurt either.  I knew that this title would catch your attention, but our real goal here is to be adventurers, right?  And trying to go on adventures when we are burdened by debt is kind of like trying to row a drift boat down the river with the anchor down.  You can row your heart out every single month and never make any progress.  And how much more fun would it be to adventure without having to worry about how to pay for it?  But how can you get there from here?  Especially if your “here” feels like a desolate place that barely covers the bills now?  How can you even think of getting to a place of financial freedom if you’re just scraping by paycheck to paycheck?

This isn’t an article about starting a new business, or getting a new job.  This is an article about using the resources you have now.  Once you have your finances under control, you will have the freedom to change jobs or go back to school or start a new business.  But for right now we’re going to concentrate on making your life better the way it is.  This is a story from someone who started out just like other normal Americans. We weren’t given any kind of inheritance, starved (literally) through college, work somewhat normal jobs, and still managed to pay off all our debt, house included, and are now free to choose our adventure almost every day. So when I say I know where you’re coming from, I really do.  In my previous article on living debt free, I talked about some of the reasons that we should live that way.  Now let’s talk about the how.

Sometimes the hardest part of any new plan is knowing how to get started. I don’t consider myself an expert, but I can tell you how we did it, and add to it an Accountant’s perspective.  Most articles you read will tell you that the first step to gaining control over your money is to live by a budget.  I agree, but this isn’t something typically taught in school, so the average person has no idea how to begin.  That’s where we’re going to start today, with the very basics.

When I was teaching Accounting at our local community college, I would have students set up a budget for themself as if they were an actual company.  I would first have them keep track of their expenses for a whole month, and then they would classify these expenses and make up financial statements for themselves.  Inevitably, almost every student would put in their narrative that they were surprised that they spent as much money as they did eating out, or at Starbucks, or on basics.  The point was that they really underestimated what they were spending.  I know that I am always surprised at how much money seems to just “seep” out, without my knowing exactly where it is going.  And it is surprising how much it costs for groceries, or kid’s activities, or fuel.  But the only way to really see that is by tracking your expenses.

What I want you to do for a full month is to track every dime you spend, whether it be for groceries, clothing, housing, insurance, utilities, or even the quick trip to the convenience store on your way to work. Every. Single. Dime.  At the end of the month you will have a better idea of what it costs for you to live, along with being able to see where you might be able to cut back a bit.  Once you are armed with that information you will be ready to construct a realistic, livable budget.

While you are tracking those expenses, there are a few websites to visit that give tips on budgeting, especially budgeting for different stages of life, because honestly a college student has different goals than a family, or a retired couple. There are sites that will give you sample budgets, and there are apps that let you enter your budget then track your spending to make sure you are spending within your budget.  Look around; see what format fits your lifestyle, what feels comfortable.  If you have any questions you can post them in the comments below, or DM me.  And remember what your motivation is.  We want to be free from financial burdens, be able to go and do what we want, when we want.  We want to be free to live our own adventures.  I want you to own your adventure, in the sense that you can choose your lifestyle without having a big heavy credit card balance dragging you back.  The time to do it is now!

Budgeting Helps:

www.mint.com  For info on setting up a budget, paying bills, and more.  Also offers an app.

www.everydollar.com  Budgeting tools, tracks spending, also has an app.

www.feedthepig.org  Tips on saving, budgeting, and investing.  Lots of different articles that pertain to different stages of life.

Microsoft Excel also has several different budgeting templates

 

Why Live Debt Free?

Why live debt free? We live in a society that makes it easy to have just about anything we want through the use of credit.  We also live in a time of instant gratification.  We can have what we want now, if we only sign on the dotted line.  Worry about the payments later.  So why should we avoid doing this, if we can drive the cool car, have the bigger house, or wear the nice clothing NOW?

Because what seems like a great idea in the moment can come back and haunt us later. Emotional financial decisions almost always come back to bite us in a big way.  There is also a lack of satisfaction with something that we don’t have to work for.  If we have to wait and work for something, it seems to be a bigger deal when we finally get it.  And by the time we have saved for something, we are pretty sure we still want it, while impulse buys often lead to buyer’s remorse.

The bigger part of this though is what debt does to our lives and our marriages. The American Bar Association has stated that almost 89% of divorces can be attributed to financial problems.  The weight of debt on a marriage can’t be underestimated.  Add to this the fact that many of your choices are taken away from you if you owe money.  Are you stuck in a dead end job because you have payments to make?  Are you paying for your vacation long after you’ve returned home?  Can you not sell your home because its value has dropped and you owe more than you can sell it for?

Do you want to break this cycle? I would like to walk you through the steps we went through to become debt free.  And the freedom that came into our lives when we owed no one and owned our home.  We were able to fully fund our retirement.  We were able to fund our children’s education (within reason, we’ll talk about that subject later).  We are able to travel where we want, when we want, and pay cash.  We don’t fight about money.  And we don’t sweat it if there is a downturn in employment, because all we have to do is pay utilities and property taxes.  My family will always have a home to live in.  And I have had the freedom to work from home as I please.  And we are able to go on adventures without worrying about how to pay for them.  So are you ready to join me on the road to becoming debt free?