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That Dirty B Word

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Apr. 28, 2015

That’s right. Today, I’m going to talk about budgets! (Wasn’t what you were thinking?) Lots of people put this off as much as possible, so let’s just dive in.

You work hard, try to save money, but it always seems to disappear. When friends plan things for the weekend you wonder, “Can I actually afford this?” Seems like you need a budget. Aren’t quite convinced? Financial experts add a few more questions to the list: Are you alive? Do you spend money? Would you like both to continue?

Okay, okay, no dire threats, I know. But seriously, budgeting is the first step to financial peace for your entire life, and you don’t have to have a steady salary, retirement plan, or be a stock-market whiz. All you need is addition, subtraction, and a sharp eye for your cost of living.

My guess is it’s not the addition and subtraction that have stopped you; it’s the “sharp eye for cost” bit. For me, at least, it’s the most difficult thing about budgeting. It’s also the most fundamental. Where do you spend money? Is it necessary? How do you know?

1)    Track your purchases! During college I worked near campus at a coffee shop. Students never, ever saved receipts. They probably thought (and I’m guilty of this as well!) that they had a “good idea” of their spending, but as someone who has tried to budget, failed, and tried again, I know specific numbers are indispensable. At the most basic level, you can simply save every receipt.

Alternatively, you can create an online account with a reputable company like Mint.com. This service will link to your bank account and credit card, automatically tallying your expenses. Mint.com helps me personally because it saves time and eliminates the hassle of hoarding receipts. The downside is that it’s difficult for me to track my cash purchases.

2)    Total your costs. So you have the numbers, now what? You have to tally up costs in some way, so snag a budget template online, or download an expense tracking app. Quality products, like the GoodBudget app, are often free and provide tools like graphs and charts to help you visualize your spending habits. If you use Mint.com, your expenses are tracked in your online account. From there you can assign them to different categories like “Gas & Fuel” or “Restaurants” to sort your purchases.

3)    Figure your income. Examine how much money you have and where it comes from. Wages? Your parents? Savings? Templates and apps make this step seamless by displaying how much money you have currently alongside your income. In addition, services – like Mint.com – link to your bank accounts and automatically display deposits.

4)    Compare your results. Are you chipping away your savings? Are you spending money eating out that you would rather spend on something else, like travel? Comparing #2 and #3 will highlight that.

Once you know how you receive and spend money, you’re better equipped to make good choices with it. Financial gurus can tell you how much to funnel into savings, what a reasonable gas budget is, and the like, but the first step is recognizing your current financial state.

Having a working budget has made me more confident and allowed me actually to focus less on money. It’s no longer a mystery. I’m free to work hard, save money, and then know exactly where it goes. It no longer “disappears”. How awesome is that?

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