Friends, for this Type Z (yes, as opposed to Type A) personality, this next topis is one of the hardest lessons that I had to learn. I’m a free spirit and never did I think I could do this. But after our year of unemployment and coming face to face with really tough financial circumstances, I couldn’t NOT get a handle on exactly where every dollar was going.
Giving Every Dollar a Job is one of the most important financial decisions one makes to get their family finances in order. Yes, budgeting is back, and you thought I forgot about this dreaded “B” word topic after my last post, didn’t you? I didn’t.
With unemployment on the rise and so many people looking for jobs, what in the world does it mean to give our dollars a job?
Dollars are told what to do, and every dollar in our budget needs to have a task. There’s such freedom in understanding and figuring out what that means for your family.
Too often with traditional budgeting, one looks at last years expenses, guestimates the amount needed for each category, and then assumes, if spending around the same dollar amount, our budget will come in on track. That ends up being a problem, and we can’t understand how we got so off base. Even though we think we have a plan and are being specific, it’s too loosey goosey. Budgeting for the big things – food, mortgage, insurance, car, etc, and then have these very general over flow category such as “savings” or “incidentals,” is a recipe for a budgeting flop. I don’t know about your family, but in ours, life is a series of incidentals, and having these two sweeping categories just doesn’t work. Breaking them down and becoming very specific is key.
Setting a budget may take months to get right, and it needs to be worked and reworked for your family. During your first few months, you’ll need to track and reevaluate every dollar. If you’re in serious debt, I highly recommend the accountability of looking daily at every dollar spent, then weekly, and eventually monthly. Daily may seem like an overkill, but if you take the time to add up how much your daily interest is costing you, the 30 minutes a day of planning adds up to quite an incentivizing price point. Debt occurred with one day, plus one day, plus one day and you need to be willing to put the time into replaying and restructuring those days.
Finding a budget that works for you comes from getting down and dirty. It comes with being specific, digging deep and really telling your money where to go. When initially working your budget, don’t let that left over $100 go unassigned. You must give it a job!
The reason budgets don’t work is that people have unrealistic expectations. It seems so easy when it’s put down on paper, doesn’t it? From reading previous comments, it’s the reality of following that budget that brings the trouble. (We’ll get into various ways to make it work in another post.)
For instance, determine what “incidentals” entails and name them. For parents, it may be these birthday parties our kids get invited to, and the expectations that ensue for presents. Seriously? Who ever budgets that much for those? That can get you into trouble. How about the nail you ran over last week, and the necessary new tire (even though you just put new ones on a few months ago.) We don’t just have a car category. We have a “our van is in serious trouble and will undoubtedly need repairs” category. Now, as much as it pains me to put money into it, break downs don’t catch me by surprise. Hopefully, I don’t have to touch that “repairs” category, but if I do, it’s there.
How about the “savings” category. Determine “what the “job” is of this savings? Are you investing? Saving for a dream home addition? Trying to pay off one extra mortgage payment a year? Maybe a combination of multiple things? Then give those dollars a task and make them work for you, by hopefully recruiting new dollars if you’re doing it right. If you’re just starting out, savings may be an elusive dream, but don’t worry, you’ll get there and I’ll scream for joy with you once you add in these jobs.
Remember, give every single solid dollar a specific category. You determine what that category is based on the priority it holds within your budget.
Everyone is different and this is where you need to be honest with yourself, if you’re going to make this budget work for you. If a Starbucks splurge is a frequent priority, then one category should be “Starbucks.” Don’t just pretend that you don’t spend that amount, claim it as a priority and name the category.
Determine exactly how much will be spent there during the month and stick to it. (You may be surprised.) Yard sales are a huge part of my budget. I have a specific yard sale ( spring/summer) and thrifting (fall/winter) category. If I didn’t, money would fly through my fingers every Saturday morning because every thing is a great deal. I am not going to put $10 a week into that category, and try and pretend that is a “good girl” number when I know that often I spend way more than that amount. I have spent $50/week, which may seem astronomical to some, but this is where one needs to be honest with their budget, name that it as a category and put in the amount, not only that you can afford to spend, but one to which you will stick. If that’s $10/week for you, then only take ten dollars cash.
When the money is gone, it’s gone. No excuses, no negotiations.
The value in budgeting like this is that you have accounted for every penny you have in your budget. The act of sitting down and setting specific numbers is tremendously valuable because you’re actively making decisions, rather than letting things happen. You’re taking control of your money situation, rather than it controlling you. Money may be tight, but your finance will not take you by surprise every month sending you into a perpetual state of panic.
The two highest spending months are ahead of us. There is NO BETTER time to get down and dirty than right now. You do not want to have regrets in January. Let’s ring in this year with sweet bells and whistles, not Visa and Mastercard statements.