One thing that has gotten us in to trouble for sure, is not having a budget. When I was in school they didn’t teach us to create a budget or balance a check book. Unfortunately for my husband and I, neither did our parents. Therefore, we used the only method we knew how – looking at how much we got paid on Fridays and making sure we didn’t spend over that amount until our next paycheck. Naturally, this method has a few flaws.
Flaws with not budgeting
For one, it’s hard to remember the due dates of all your bills and how much was going to come out. Therefore, it was very easy for us to overspend and not have enough money set aside for the bills. This leads you to rely more heavily on credit cards to cover your expenses. In some cases it can even lead to overdraft fees from your bank. We have definitely had our fair share of overdraft fees. Once we started implementing a budget, things got a lot easier. We had a better idea of what we were spending and what bills were due when. This was so we could make sure we always set enough money aside for those essential items. Then we could better understand how much discretionary income to spend on the things we wanted after setting aside the appropriate amount of money to pay the bills.
When to look at your finances
Since we get paid of Fridays, I am now in the habit of going through our budget every Friday. This way I can see what we have left over after all our bills are paid. I know this doesn’t sound like the most exciting thing to do on a Friday night, but I actually find it fun and relaxing. It can make you feel more relaxed knowing that you have the money you need already set aside for bills. I also enjoy talking to my husband about how much money we have left over and what we should do with it. Lately, because we are trying to pay off debt – we usually decide to take the remaining amount and put it towards a credit card or other debt that we have to pay off. When we do that we feel super accomplished afterwards and like we are one step closer to becoming debt free.
Buying things with discretionary income
Sometimes, we use some of our remaining discretionary income to buy something that we really want and think will make our lives easier. For example, we had our towel rack in our master bathroom break and so we have been keeping a towel on the counter instead. We decided to use some of our discretionary money to buy a new one that wasn’t too expensive. Although this seems silly or insignificant, we were really excited to having a functioning towel rack again. Sometimes it’s the littlest things that make you happy.
With all that said, here is a look at the template that we use for our budget:
I have a Mac computer so I just use the budget template on Pages. I also made a few modifications to it to make it fit my needs. There are hundreds of budget templates out there. If you have a computer with Word or Excel, you’ll find some budget templates in there too. The template you use doesn’t matter – what’s important is that you use something to create a budget that works for you. Even if you don’t stick to it at first (we sure didn’t), just having one forces you to take a look at your finances more regularly and acknowledge when you’ve gone outside of your means when you really shouldn’t have. Then you can adjust your budget accordingly.
Budgeting in action
For example, we had budgeted $250 a month for pet food. We quickly discovered we were actually spending closer to almost $400 a month. This forced us to take a closer look at our budget and decide where we could pull money from to increase our budget for pet food. Or we had to think about how we could lower what we were spending on pet food. That’s what’s great about a budget. You may not always follow it to a T, but you try your best and make adjustments along the way. The budget you create now may not work for you a year from now, or may not even work for you a day from now depending on the circumstances. But actively looking at it and making changes to it is key to being successful with living a more frugal lifestyle.
Now that you have a budget, it’s important to use what discretionary income you have wisely. Check out our post about How to Determine if You Really Need Something so that you make sure you are spending your money wisely.