February 2nd, 2012
The Key to Having a Budget: You Have to Look at It
My husband and I have been talking about money a lot lately. If you’re a regular reader, you know that we have a big financial goal this year.
We have a budget. And it’s a pretty thorough one at that. My husband tracks our expenses, I handle the savings accounts and joint credit cards, and we make the big financial decisions together. We’re a great team. So great, in fact, that things have been running smoothly on auto-pilot for a couple of years.
Therein lies the problem: We haven’t adjusted our budget in two years.
During that time, my husband has received a couple of pay raises and I’ve switched jobs, resulting in a household income increase. If you find yourself running on financial auto pilot too, here are a few tips for updating and revamping your own budget.
Revisit your budget when your income changes.
Two years ago, I was working an hourly, part-time job. Now, I’m full-time and salaried. Yet we hadn’t changed our budget to reflect the boost in income. Finally, we’ve adjusted it so that we’re putting more money into savings and paying down debt faster.
Reevaluate your budget based on your spending trends.
Something else that has changed with our income is our spending habits. As time at the office increased, so did the frequency of eating out. However, we had neglected to create a separate spending category for dining out. According to my Mint account, we average over $130 each week at restaurants. With our new budget adjustments, we’re hoping to slash that number by at least $50 each week.
Revise your savings strategy.
We’re great at putting away cash into a savings account for emergencies, such as unexpected medical expenses or scooter maintenance, but we’re not-so-great at saving for other things. This year will be different. I opened two new savings accounts: one so that we can save up for a trip sometime in the summer and another so that we can hit our big 2012 savings goal.
Review new budget strategies.
My favorite spending category in our budget is called “Together Fun.” It’s for when we go out with friends, go to the movies, grab coffee at our favorite café, or any other activities that we enjoy doing as a couple. But sometimes we have a little too much fun and our fun spending bleeds into other categories, such as groceries. In order to keep that from happening in the future, we’re initiating a cash policy and will withdraw “Together Fun” cash at the start of each pay cycle. When we’re out of cash, we’ll just have to entertain ourselves at home until the next paycheck.
Whether you choose an online tool, budgeting software or pen-and-paper, it’s a good idea to revisit your budget every month. If you have a change in income, revise your budget as soon as you receive your first paycheck. Just like us, you’d be surprised where your money is going.
Keep up the Karma!,
Bethy Hardeman, Social Media Maven
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I have always been good about saving money, but didn’t start a formal budget until this year. It’s been a huge tool for focusing on paying down debt. I plan on reviewing the budget every month so I can identify where I am spending less so I can redirect the extra money towards my debt snowball.
One thing that I did overlook, and I’m glad you brought it up, is a fun money spending category. I have to add that in because having a budget is no fun unless you can live a little. Thanks!
Yeah, if we didn’t have the “fun” category we might go crazy trying to fit it in otherwise. Thanks for the comment!