Sense & Centsibility Blog

The Secret to Starting a Budget

“Do you think we need a budget?” It was like in a movie where stuff happens in slow motion.  I’m sure the look on my face was one of pure terror.  I replied, “Uh… I guess?” This brief conversation is how my wife and I started our lives as budgeters. 

We’ve talked about budgeting in the past, but it never actually happened for a couple of reasons. We both had decent paying jobs and had a fairly low expense lifestyle.  We had enough income to pay all our bills, put some away money for retirement and not have to actively pinch pennies to make ends meet.  We were doing ‘fine.’ We could basically spend our money freely. And that’s what we did.

couple budgeting

I’ve worked at LSS for about 6 years and have a finance degree. Money management should be second nature, but during any given month, I couldn’t tell you what we were spending our money on.  I knew we had enough money so I didn’t worry about it.  I think one of the main benefits of budgeting will be knowing exactly where our money is going.

Budgeting, like most things that sound easy, is almost always difficult.  It really doesn’t need to be, you just need to start.

Our Problem

In the past, we tried using an Excel spreadsheet to categorize and track expenses. This worked great for me, but not so great for my wife. The spreadsheet was on our home computer but the spreadsheet was too complex for her.  Different tabs for different categories, formulas, pivot tables - the whole nine yards!

“So where do I actually enter in our expenses?” If it’s not easy to use, she doesn’t have time for it and that is true for most people.

Our Solution

This time, we decided to try a phone app. We found an app (called 'goodbudget') that mimics the ‘envelope system’ and that allows us to share an account so we can access it from both our phones.  You establish envelopes for the things you typically spend money on and that you want to track. This could be anything from rent/mortgage, utilities, groceries, car/transportation, entertainment, etc. While the thought of having a bunch of envelopes lying around my house with cold, hard cash in them makes me nervous, the idea of virtual envelopes is great!

We set up envelopes using the app with our regular and fixed expenses first.  These were mortgage, utilities, cell phone, and debt payments.  We then started going through our more variable categories and determined the envelopes we needed: groceries, eating out, gas, pets, household, and medical.  To finish up, we decided to set up envelopes for our periodic expenses, which ended up being car registration, insurance, and maintenance.  Of course, the categories you use will be different than ours.

One thing that has made us struggle in the past is that we never knew how much we should put into envelopes like groceries, entertainment, clothing (part of our household envelope).  We decided to start the first month with rough guesses and adjust from there.

We need to know our starting point to get to where we want to go.

The secret to becoming a budgeter is simply to start.

Don’t let the little things get in the way. It’s very easy to get bogged down by the details and not do it.  Rather than trying to prepare for every expense imaginable and budgeting for it, get the main categories in place and start tracking your expenses.  See if you can stick to the budget. If you go over, do some analysis and make adjustments.  Did you spend $100 more in groceries but didn’t buy as many clothes as you budgeted for?  Shrink the clothing budget and move it to groceries!

Another idea for budget help is meeting with a financial counselor. S/he can shed some light on different budgeting options and can help you find a method that works for you.

And if you carry balances on your credit cards, an LSS financial counselor can help you figure out the best method to get rid of those cards for good. Call us for your free session at 888.577.2227 or get started online.

Author Pete Jonas is a Details and Data Wrangler with LSS Financial Counseling.