Dealing with Real Part 2
July 19, 2016
Since you asked for it: Okay, okay, you didn’t…I just had more to say:-)
One reason I’ve previously loathed been un-inclined toward budgeting is that I felt like I was setting myself up for failure. I’d assign X dollars toward Groceries, Y dollars toward Random Expenses, and Z dollars toward Bills.
But then I’d spend 2X on Groceries because I ran out of expensive or bulk ingredients all at the same time, needed to get ingredients to make something for the work party, and be invited to a dinner and asked to bring something fancy.
Then I'd spend my budgeted amount of Y +$67 on my Random category because interestingly “Random” includes an almost infinite number of purchases.
And I spend the budgeted amount of Z + several more dollars on Bills because I forgot that I have that annual gym fee or because vehicle registration is “a thing”.
Enter a Budgeting Tool
Using budgeting software helped immensely. Rather, using the right budgeting software helped immensely. It is not a stretch to say that a zero-based budgeting tool actually changed my life. It helped me keep the reality of my money organized.
The right budgeting tool for me is called You Need a Budget (YNAB). No, this is not a paid promotion; I just happen to use and love and recommend them every chance I get.
YNAB makes it easy to customize categories and add as many as necessary for your situation. For the first time, I had a place to keep my money and expenses organized, and not just in my head.
I used the information I surfaced in Dealing with Real Part 1 to fund as best as I could all the expenses of my life.
Budgeting only actual money, and having it stay organized throughout the month was life-changing. And, over time, it was easy to keep track of where I was consistently overspending. This indicated where I was still playing pretends with how much “living” really costs me.
Start Where You Are
I am a big fan of cutting back and trimming expenses for the sake of your bigger goals. But—this is a very big but—you will not succeed at budgeting if you start a new budgeting system with unrealistic expectations.
You’ve got to start with the reality of what you are actually spending right now.
If you consistently and realistically spend $600/month eating out, that is what you spend. And budgeting $100/month right off the bat is a guaranteed and imminent fail.
If you spend $500 on clothes a month, that again is your reality, whether you want to admit it or not. And budgeting $0 for clothing portends budgeting and financial self-respect disaster.
"Real" Budgeting Recommendation
My unsolicited advice in this post that you did (not) ask for is to start budgeting with realistic or even generous estimates of the amounts you actually spend right now. If you think you spend $500/month on groceries try budgeting $600 if you can. If you think monthly memberships/classes cost $100/month, try budgeting $150.
Do not put yourself on a budget and sign yourself up for Camp Ghandi at the same time! You will loathe budgeting and life and yourself when you fail. And it will reinforce your long-held belief that you are terrible with money, have no self-control, etc.
Before you try to make changes, I recommend you get in the habit of tracking your spending and looking at your category balances before you spend. That will be a major step in helping you learn to love budgeting. Budgeting is really just being the boss of your spending and making a plan for your money.
I only advise spending 2-3 months in this space since the life you really want to live may include making changes and shifting priorities. And by this point, I suspect you will see clearly where you have been mindlessly consuming.
And this mindless consuming could be keeping you from the life you want to live.
It could be preventing you from education and career opportunities.
It could be keeping you from spending time with your family in the way you deeply want.
It could be preventing you from contributing to causes you care about.
It could be sabotaging your ability to retire at a reasonable age or ever.
Once you have the budgeting process humming along, then is when you analyze what it is you really want out of life. And start organizing your money and spending in line with your priorities.
Will you occasionally overspend in one or several categories? Sure. Will you need to clean up the occasional mess? Absolutely. But you will know and feel that you are finally heading in the direction of your dreams, and that you have the method and tools to get there.
I recognize that "method" and "tools" don't sound sexy, but trust me, they feel sexy for the traction you are making forward.