New Year, Fresh Start #4: Budget

Thank you for your patience with the small delay as I continue on with my series – its been a busy week.

Ever end a year and wonder where all your money went? This happens to us – regularly – not just at the end of the year. Its so easy to lose track of spending and in no time, your savings goals can become unattainable.  But you can get better at this – with some planning and dedication.

I have a habit each year of creating a bi-weekly budget. This is aligned to our pay dates and based on our bill payment dates. All of our bills are managed by the due date to make sure we always had the money to pay them on time.

We always put money away on debt, but our variable spend was not being tracked properly so then we ended up just pulling out that same money to pay off our credit cards.

So since we’ve mastered setting a budget and tracking vs our bills – this year we are focussed on really reigning in our variable spend. This means having a set budget and sticking to it. We want to get that cute thing for the kids from Wal-mart? Well then we better put back the bottle of wine because we are on a budget. Even with both of us making very good salaries, without sticking to a set number, its so easy to end up overspending.

We have put together an aggressive savings plan. What we are doing this year, instead of putting the money on debt, we are going to put it in savings. I find that its so much easier to save when you can see the amount piling up every month, rather than just seeing a large number get smaller slowly. Once we are on a roll, it will be easy for us to keep our budget on track.

We’ve even involved the kids. We have found taking them out with us to do simple stops was becoming a challenge, because, well, they are spoiled. But they keep talking about wanting to go to Manitoba to see Grandma and Grandpa, and going to the Bahama’s (their word for basically a beach vacation). So now, every time they ask for anything – however small or big, we ask them…”Do you want to go to the Bahamas?” While it probably won’t work all the time, we find them becoming a bit more aware of the value of money. For example, my husband and I were talking about the hockey tournament in Ottawa and our contribution to the food for the team and my daughter said, “But that costs money! Don’t you want to go to the Bahamas?” LOL! While some things are unavoidable, I’m happy to know that we’ve gotten the kids thinking.

So if your like us, and need some good rules for budgeting…here are some key tips.

1.  Use a spreadsheet – this is going to sound extremely archaic considering there are great apps such as Mint to help you with this – however, I’ve tried this products before and found that without obsessing over each number (by writing it down again and analyzing each transaction) I just fell into old habits. You can use these tools also to give you a one stop shot – but I still highly recommend also using Excel or Numbers.
2. Don’t just do a monthly budget – break it down by the week. At minimum, if you get a pay check every two weeks, do a bi-weekly budget. The smaller the durations, the easier it is to stay on budget.
3. If you don’t have online banking – get it – and monitor them like a hawk. I check my balances and transactions every day and put everything into the spreadsheet. This way I know exactly how much I can spend in order to still have money for the upcoming bills.
4. Know where your money is coming from and going – at all times. Re-write each transaction – becoming obsessed with the numbers will help you pay closer attention the next time your spending at the same stores.
   Set Financial Goals. Why do you need this budget? Save for a trip, pay off debt, save for retirement, all of the above, and more? Write it down
5. Make a plan and be obsessed. Depending on your goal, your plan may be different. You may be able to make the plan yourself or you may need an professional to help you. But once you have made your plan, be obsessed with it. Talk about it, think about it all the time. When you do that, it keeps your goals and plans top of mind, not just an after thought Make your goals top priority.

So there you have it, my fourth instalment for the New Year, Fresh Start Series. I hope you have been finding them useful so far.  My final post in this series will be coming soon!