I admit it: I think writing about how to budget is one of the most boring things ever. There are plenty of frugalistas and budgeting mavens out there without me piling on. But when thinking about what to write about this week, I realized that if I look back at the last 20 people I worked with 1:1, all of them wanted some direction from me with clarity over cash flow and understanding how to strategically cut back. In other words, knowing how to budget. Darn it…I’m a budgeting expert and I didn’t even know it!
How To Budget Using Software
Everyone who has ever been to my website knows that I prefer Mint as my spending tracking software. The short-hand reason is: this is the first software where I don’t spend hours inputting and managing the data—and instead, that leaves me time to spend interpreting the data.
I got set up on Mint in about 15 minutes the first time. Lots of people send me budget apps and software to try, and if I don’t see real data at the 30 minute mark—or it requires me to set up a budget before I can track current spending—I abandon it. Let me reiterate: you shouldn’t need to set up a hypothetical budget to understand where your money is going.
I see budgeting not as a static list to measure spending against, but instead, a process that brings you back to clarity on a regular basis. Like stepping on the scale to weigh yourself once a week. Learning how to budget isn’t about setting arbitrary spending marks, it’s about making your current reality more efficient. Here are some typical action steps I recommend to stay organized (plus some of the ADD tactics):
- Designate one time per week to go through mail and review Mint. These two aren’t necessarily related, but together should take about 30-45 minutes per week, unless you get really into it. Saturday morning might be better than after work, because then you’ll be “fresh.”
- Create a visual cue for the mail and bills, such as a big colorful basket, something easy to toss it into as you come in the door and that will fit everything for 6 days. This is also my pile if I need to look something up for my health insurance, or if I get a speeding ticket (grr) I throw it here.
- Before sitting down to the computer, process the mail – one pile for bills, and honestly, the only other pile I end up with is recycling.
- Check your account balances and pay bills. If you don’t plan to pay a bill immediately and don’t have the ability to schedule a bill pay for a future date, then schedule a task in your calendar that will remind you to pay the bill before it’s due (like that darn speeding ticket).
- Then you can review Mint (finally, right?). When reviewing Mint, go to the Trends tab and look at how you’re spending your money—you might want to designate another time to categorize expenses and set up the rules (that might take another 15 minutes per week, I do it while I am waiting for appointments). The Trends tab more than anything will motivate you to change, because most people find 1-2 ways they don’t like how they are currently spending their money.
Timing and Expense Streamlining
When people get started with tracking their spending, I always tell them that it will take probably 90 days to get clarity, because no two months look the same and you’ll need to see what the individual spending trend is in a particular category before taking action (or freaking out).
It will take another 90 days most likely to institute change, whatever that may be (like how I cut back on coffee). Be patient with yourselves! This isn’t a crash budget, where you cut back so much initially that you lash out and spend $500 at Amazon because you felt so deprived.
When trying to change spending, I always go through this process:
- Reduce frequency – this might mean going to the grocery store fewer times but in a more organized way, or it might mean taking my restaurant eating down by one visit per month. So if I have been to Yummy Teriyaki 4 times per month, I try to go only 3 times per month (and THEN I set up a budget in Mint to track this).
- Defer purchase – before I buy anything that isn’t in my normal “must-have to live” spending, I put it on a wishlist (at Amazon), bookmark it in my browser or put it on a physical list that I keep by my TV chair. I make myself wait 30 days to buy, so I know it wasn’t just an impulse. 90% of everything I bookmark is impulse, I have found.
- Find alternatives – my personal example is take-out food. I don’t actually enjoy take-out food, but I tend to buy it a lot when I am super busy, stressed or simply acting unconsciously. I much prefer a BLT or grilled cheese as my dinner over take-out, and that only costs me a few bucks, versus $20 for each take-out meal.
What About Credit Cards?
When getting familiar with how to budget and this entire process, I STRONGLY encourage you to take out the credit cards from your wallet. People keep them in there because they aren’t sure how much money is in their checking account, and just to be safe from accidentally over-drafting, they charge purchases.
I remember doing this myself—standing at the grocery store, having bought a little bit more than I intended, and choosing to charge it instead of putting something back because I wasn’t totally sure I had enough in my checking account to cover it. Once I stopped using credit cards, I was crystal clear about what was in my checking account and available to spend before I went out the door on any kind of shopping expedition.
Actions This Week
Choose Your Weapon. If you don’t like the idea of Mint, plenty of people like YNAB. Or here’s a list of other ones. Just pull the trigger and resolve to get started. Even if you don’t go back to it for a month!
Schedule Your Date. If weekly review seems overwhelming, then do it every other week. Or I just told someone to do it once per month to get started. Only you know how often feels good.
Reframe. Don’t hate the process. Sometimes it’s hard to start new habits, and this is one of the few I know that will take less time and management the longer you do it. Bribe yourself if you have to, but make an agreement with yourself to start moving toward more clarity.