Budgeting is the Secret to Financial Success

Budgeting allows aligning your spending with your hopes and dreams. It is tough to know how you are doing and if you are on the right path unless you track your progress. Especially if you are prone to spending more than you make on credit cards, budgeting is a necessity. If you are like me, not having a budget would mean you would be spending way too much on food, going out to eat, drinks, and other crap you don't need.

Why having a budget is essential.

It is about having your money represent what is important to you. And no two budgets are going to be the same. When you start tracking where your money is going, you might be surprised by your spending. The key to having a budget is answering these questions:

  • Does my spending match my long term goals?
  • If I have a partner, are we on the same page?
  • Am I spending more than I make?
  • Do I have enough for retirement or am I behind where I want to be?
  • Do I have an emergency fund to cover unexpected expenses?
  • Does my spending reflect where I want to be in 5, 10 or 20 years?

When you start budgeting, you might start questioning if you have enough or too much in specific categories. For example, we were estimating $800/mo for our groceries budget (which includes things like toilet paper, dog food, etc. for a family of four). We were thinking about increasing that to $900/mo when we get credit card debt free, but then we started to wonder if we could save money in this category. That was when we decided to cut it back to $600/mo. By making larger meals where we had leftovers allowed us to freeze meals for the future, and limiting how much processed foods we buy, we are discovering that cutting back here was easy-peasy-lemon-squeezy. Reading other blogs, I am learning we could probably trim this down even further… but that is a big maybe!

How we manage our monthly budget.

There are lots of options as far as how to manage a budget. Each has their benefits and cons. I've tried several in the past, but have been using You Need a Budget (YNAB) for over three years, and we love it. I included a link to their website, which will give you and me a free month if you signup. In future posts, I'll talk more about this service, but it is worth a look if you haven't seen it before.

YNAB has a lot of things I love. The key elements that make this successful for us:

  • Auto pulls in transactions from our spending accounts, so we can easily see how much money we have left in each category.
  • Their mobile and website app allows you to add “pending” transactions before they go through, for an updated look at any point.
  • If you are trying to get out of debt, YNAB makes it easy to see all balances and how much debt you can pay off every month.
  • For bills, we have auto payments set up with the correct amounts in each billing category. Which means we should never be late on our monthly bills.
  • If you read their articles, they recommend getting one month ahead of your budget. That will allow you to spend any of your monthly budget categories starting the 1st of the month. Going this route dramatically simplifies managing your budget, even though it can be a PITA to get there.

It costs about $7/mo for YNAB. But it has saved us a lot of money.

Are you currently using a budget and what do you use?

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