We need to talk
Posted on July 3, 2007 16 Comments
Ah, the four words that make boyfriends cringe. We Need to Talk. Go ahead and get comfortable first. Grab a glass of wine. Turn off the TV. Kick off your shoes. Comfy? Good. Because we need to get serious here.
According to last week’s poll, 20 percent of you don’t keep a budget. I guess it makes sense, I mean, why else would you be visiting a page called “The Budgeting Babe” if you weren’t seeking your own enlightenment? And instead of providing you with advice, here I am all talking about spending and saving, thinking we as a group had collectively moved past budgeting 101. But I was mistaken. Why didn’t you guys tell me?
The truth is, budgeting is really freakin‘ hard. And annoying. It takes a ton of work to create one, and even more work to stick to one. As evidenced by the 53 percent of you who mostly follow a budget but sometimes slip up, even when you have one there’s no guarantee that you’ll stick to it. But I guarantee you, I GUARANTEE, that if you have one, you’ll immediately start spending less and saving more. How can I make this promise? Here’s how:
1) You’ll be amazed at how much you spend on stupid crap. You’ll actually be embarrassed. Every time I go back to see how I did, I’m always incredibly surprised at the “miscellaneous” category expenses in my budget. Or the “gifts” category. And of course, the “eating out” category. Those are things that are easy fixes! Shop at the grocery store more often and buy the same food you like to eat out! Cap your monthly gift spending! Limit yourself to 4 cash machine stops per month! The possibilities are endless.
2) You’ll figure out how much you can ACTUALLY afford to save every month, and then you can put that into a savings account before you can get your greedy little paws on it. So if you’re not budgeting and let’s say you’re putting $200 per month in a savings account, and four percent of your salary in a 401k, I bet if you did a budget, you could figure out how to save $300 per month (it’s only$50 more from each paycheck) and increase your 401k to five percent. And then in two months, increase it by another $50 per month, and so on.
Maybe you think you don’t need a budget. OK, if you’re fabulously wealthy and have an unlimited supply of money coming in, then you may be right. But I’m pretty sure Barron Trump can’t read yet (quick shout-out to the Slovene-Americans!), and Warren Buffett sure as hell doesn’t read The Budgeting Babe. For the other 99 percent of the population, budgeting is actually helpful.
There are a host of programs out there that offer budgeting software. I have Microsoft Money, but I’ve read that some banks will do the work and analysis for you (Wells Fargo) online. I also have read about some great options, including www.moneypants.com (run by a trio of really cool, down to earth women). And, I recently received digital scanner from the folks at www.neatreceipts.com that literally does everything for you – all you do is scan your receipts and the smart software basically builds your database for you (product review is coming shortly).
Right now, I just use my own excel spreadsheet because that’s what works for me (though it may change based on the scanalizer).
What I would suggest doing is this: spend a day with your June finances. Get intimately familiar with them. Pick a digital program, any one, and plug every single receipt into it. It will take forever and be painfully boring. But listen to this: You never have to do it again if you don’t want to. Because that one exercise will tell you how much you spend in each category, and then you can compare it to how much you’d like to spend in each category. There will be lots of categories that are fixed: rent or mortgage, phone, internet, cable, electricity, gas, water, car payments, loan payments, savings account, retirement, etc. But there will also be plenty that are flexible: clothes, shoes, dining out vs. grocery store, entertainment, gifts, hair/salon and more. And those are the categories you can shave from.
There are going to be some people who just can’t shave anything. One of my co-workers was telling me it’s really hard for her because every single extra penny she has goes to doctor bills. If that’s the case for you, then it’s even more important to have a budget, I think, in order to scrounge some savings.
But for the majority of who those who write to me, who don’t have a budget, do this. Now that you’re comfy and you’ve had your glass of wine, stay seated. Pick up that pen and paper, and write yourself a “to-do” list. On it, write, “Clear date to build a budget.” Do what you have to do to clear that date – get a babysitter, cancel your plans, call in sick. I don’t want to hear your excuses, just do it. To my twenty percent, stop procrastinating, stop telling people you don’t know where all your money goes. We’re tired of it. Figure out where it all goes. You can do it, we’ll support you.
Need some more motivation? Try these references. Add “research resources” to your to-do list:
- www.kiplingers.com (they have a whole budgeting section on “getting started”)
- www.moneypants.com (requires subscription)
- www.daveramsey.com (free budgeting tools)
- www.neatreceipts.com (a little more expensive but equivalent to about a year of an online subscription service)
- Suze Ormon books
- Personal finance for dummies books – LOTS of titles (http://www.dummies.com/WileyCDA/Section/id-100159.html)
- Microsoft Money (I don’t know the apple equivalent, sorry)
Now, for the last item on the to-do list? BUILD A BUDGET. Do it. I’m watching, add it to your list.
OK, that’s it for our little chat today, I have to go run while it’s still nice outside. I have lots of other stuff to write about, so I really hope we don’t have to address this again! (Just kidding- it keeps me on my toes.) But I do encourage you to ask a lot of questions in the comments forum, and I’ll try to answer them. Or maybe some of our smarter well-budgeted friends can provide answers. Best of luck to you on all your budgeting endeavors.
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16 Responses to “We need to talk”
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July 3rd, 2007 @ 2:26 am
I don’t budget, I can’t and it’s impossible.
I backwards budget and setup like that since forever. I know what I make gross, put in taxes, then mortgage, HOA, utilites (all), etc. Then I know what I can spend monthly on food, clothes, fun.
Realize that when I built our new budget, DH and I put in 100% to Roth IRAs, 401k maxed out, ESPP maxed out and a huge mortgage. So our lifestyle doesn’t leave much fun, but we still manage without debt.
Mainly it’s because we don’t budget. I was on of the 5 non-budgeters.
July 3rd, 2007 @ 5:26 am
Actually, I do read your blog.
July 3rd, 2007 @ 1:47 pm
Anything that’s not fixed (basically, groceries and fun/miscellaneous) I put in a separate checking account. That way, I know how much I have to spend on whatever I want, and the rest (in my main checking account) is untouchable – earmarked for bills and savings.
I used to just take out the same amount of cash each week and spend that, so I never had to worry about going over, but the separate account is nice because I can “save up” for bigger purchases.
July 3rd, 2007 @ 1:51 pm
My wife and I could not control our finances until we made a real spending plan. For the first few weeks it seemed gruelling, but we settled in. We’re now at a point where we’ve adjusted such that it feels comfortable. Now our debt levels are dropping like a rock, our savings account is well-stocked for those once or twice yearly expenses (such as property taxes and car insurance), and we have a small emergency cushion (though very small since our jobs are very secure and paying down the debts is more important to us). Sometime this month we’ll see cost of living raises (FINALLY!) and plan to push it all into 401K funds.
So now I’m a BIG ADVOCATE of using a spending plan. It’s THE number one thing you can do to improve your financial health.
We struggled with this for a long time before figuring out how to create a spending plan, mostly because bills come monthly, but our paychecks come every two weeks (not twice a month — that’s not so hard). If anyone here wants to see the process we used to set up our plan, I wrote a big entry on it on my site here.
Oh, I’m also a big fan of using a WEEKLY spending plan rather than a monthly. Weekly is a time period we can wrap our minds around. I find with monthly plans I run out of money way before I run out of month…
July 3rd, 2007 @ 7:11 pm
ok….so I have a question. (I’m going to be real here…you will cringe at my situation) I have way to many credit cards. They are all maxed out. Car accident, death of a parent (helping out my mom after my dad passed away), and retail therapy to name a few reasons. Then I went back to school and have that bill to pay. How do I get the collection agencies to stop calling me and let me make monthly payments that I can afford?
Thank you for the advice. :0
July 3rd, 2007 @ 11:00 pm
If your a Mac user Quicken for Mac is great software. I started keeping track of all my spending and saving at the beginning of 2007. Of course I don’t have a real budget set up yet. Whenever I do a quick one I never leave a dime for everyday expenses. I want to get in gear so I can start saving!
July 5th, 2007 @ 2:06 am
I was one of the people who voted that they don’t have a budget. What I really meant was that I do live within my means but I don’t break it up into categories and spend certain amounts on food, clothing, going out, etc. It just doesn’t work for me. I max out my Roth IRA, put 10 percent (changing to 20 this month) in my 401k, and put away another couple hundred each month in regular savings. I’m 25, make $48,000 (up from $30k when I started working three years ago) and have managed to save $25,000 in retirement accounts and another $10k in savings. So I think my system is working pretty well for me (though everyone probably has room for improvement). Each person has to figure out what works best for them.
July 5th, 2007 @ 10:38 am
I am your pupil, if you’ll have me. I need instruction. I can make a budget just fine…. It’s a lil thing called will powere that I’m lacking.
July 5th, 2007 @ 2:58 pm
I agree with the majority of your comments. If you have a system that works for you, by all means, keep it going. But I know there are lots of people out there who are totally unaware of where their money goes. And lots of others, like Polly and anonymous, whose system isn’t working for them. So that’s really what this post was about. I guess I use the term budget for “system.” Sounds like it’s more about semantics.
As far as anonymous goes, I’m going to post your question as an entry and see what our readers say.
July 5th, 2007 @ 3:01 pm
And Warren, if you’re just the dude we met in Ireland that LOOKS like Warren Buffett, you don’t have me fooled. But I do owe you a round of whiskey. I’m still calling you Warren, though, and I will not sing you “Danny Boy.”
July 8th, 2007 @ 3:12 am
Do you want to share your spreadsheet with us?
July 8th, 2007 @ 11:10 pm
I probably can do that. Is there a way to post attachments?
July 12th, 2007 @ 9:22 am
I budget but my numbers are conservative which is why I feel so restricted and unable to do much except work on making more money freelancing.
but what’s a reasonable (i know there’s no right or wrong answer. just curious on the percentages.) amount to budget for eating out and entertainment not netflix but like concerts or events. i make $32K a year, my rent’s about $550, cell phone $70 (i pay for a family plan and get reimbursed) groceries i budget $50. are my numbers a bit too conservative?
any input would be great. thanks!
July 17th, 2007 @ 8:06 pm
Great post! I definitely need to build a better budget!
July 26th, 2007 @ 1:59 am
I’m with Polly, please teach me.
I just made my budget a daily feature on my blog. I’m disclosing every penny that leaves my care for the next month so I can see what I’m spending.
Then what do I do?
July 27th, 2007 @ 4:13 pm
Great post! I must have missed this one. I have you on my blog reader to read your updates, just need to go through your archives more thoroughly. Your blog is one of my favorites! Read my blog http://www.bookfinance.com/