intro to budgeting

Creating more freedom in our lives with our time and commitments led my husband and I down a path of personal budgeting.  Our dreams and vision for our future were the primary driver behind budgeting.  While we were both mostly responsible with money – living on less than we made, saving for retirement, carrying no personal debt, paying down a mortgage – neither of us ever lived on a strict budget. It wasn’t until we started down the path of a transitioning to a single income that we intentionally put ourselves on a budget and started to instill discipline with our monthly spending. Believe it or not, budgeting became fun and almost a little internally competitive. Neither of which I associated with budgeting before this journey – dread and heavy administration were more often the associations.  We found that once we got going, living on less became more fulfilling than living on whatever we wanted, whenever we wanted it.  It made those things that we did buy more satisfying and excitement began to build as we could see our discipline lead us closer to our goals each and every month.

The premise of budgeting isn’t about being cheap, it’s about focusing your resources on what you care about most. The same is true for my time and energy. I’ll sacrifice and discipline myself in certain areas so that I can have the things I value most. Not every tradeoff is an “or” sometimes it’s an “and.” I love wholesome, nutritious, and delicious food – this is achievable on a budget, it just means that it likely won’t be convenient. But who sold us the lie that everything in life should be easy?  I do understand that we’re all in a different stage in life and some of us have so many things on our plate that convenience is a requirement.  But with budgeting, time management, and overall health for yourself, you do have to get really clear about what’s important to you so that you can prioritize that and manage down the rest.  So, what have we learned since starting budgeting?  There is incredible value in the discipline.

value

• Shows you where you actually spend your money
• Ensures that your hard-earned money is going toward what you want it to
• Allows you to strategically link your finances to your vision and goals, and execute on the financial element of those
• Creates small “savings accounts” for expenses that you know are coming but don’t occur every month (vehicle repairs, vet bills, HOA dues, vehicle tabs, home improvement, etc.)
• Relieves stress – when those expenses come, you don’t have to squeeze it in, or finance it, the funds are already available in your account
• At the end of the day, discipline is satisfying; once you achieve the goal, you don’t look back and think all that hard work wasn’t worth it

then and now

Before we created a personal budget, we were living on two incomes in professional careers.  We didn’t live paycheck to paycheck, always had a surplus at the end of the month, and our spending wasn’t atrocious.  Vacations for us often looked like weeklong camping, rafting, or outdoor based adventures versus a week in the Marriott on Maui.  While the Marriott tempts me too, we just find more enjoyment out of outdoor recreation than we do beach vacations.  Generally, we didn’t finance things, even more so as we age, and if we want something we buy it with cash (including cars, home improvement, and any recreational toys).  We don’t play with credit cards. We both consistently maxed out retirement savings – knowing that our early professional years may be our highest earning years and we wanted the compounding benefit of time on our side for that investment to grow without reliance on heavy contribution in the future.  We consistently gave 10% to our local church – something that’s important to us.  Once those bases were covered, the remainder was treated like a slush fund.  We shopped, we ate out, we bought what was appealing at the grocery store, etc.  The spending was within reason, but it certainly wasn’t intentional.  In our minds, our priorities were taken care of and this money was ours to do with as we wished.  We were doing good, but sometimes good is the biggest enemy of the best.

Let me just say budgeting is a journey.  And anything worth doing, should be treated as such.  It’s not about coming out of the gate perfect and doing all the right things.  You build the practice over time getting a handle on the most critical elements first and then it’s easy to add to that strengthening other areas.  Don’t look at what other people are doing and compare yourself to that, compare yourself to what you were doing yesterday.

Fast forward to now, we have a budget for every dollar that we spend.  We’re not perfect about adhering to it – that’s our growth opportunity this year.  We found that our biggest areas of discretionary spending are groceries, eating out, and shopping.  Our preferred form of entertainment and recreation is outdoor pursuits.  These can be expensive.  And we find that sporting goods is one of our biggest spending categories that we have to be intentional about.

In our first year of budgeting, our focus was:

• Analyzing our spend over the previous 12-months to understand our spending habits by budget category
• Creating a reasonable budget, based on actual spending trends, funding the things we care about vs. overspending in things we consume
• Tracking and reviewing our spending monthly and making realistic adjustments as needed
• Controlling our food spending – we did this leveraging the cash envelope system for this category which includes groceries and eating out (separate budgets for each)

We did great on these areas!  We’re in our second year of budgeting, and now that we’ve nailed the first-year disciplines, our focus this year is:

• No spending unless it’s in the budget
• Control our other discretionary spending.  In our first year, we found that we were overspending in the non-food categories of discretionary spending (clothing, sporting goods, and other shopping).
• Review our monthly spending and next month’s budget together.  In the first year, I was mostly doing this independently even though my husband was very supportive and on board with the plan.

what’s to come

This is a food blog, which means the primary content is going to be recipes.  That said, I’m going to pepper in some content related to managing your kitchen and your home well.  One of those topics will be personal budgeting.  The scope of this will be limited to creating and leveraging a monthly budget and will not include financial advice, how to tackle debt, how to invest your money, how much you should invest, etc.  For these broader financial topics, leverage your favorite resource for managing your finances.  We have found Dave Ramsey’s baby steps to be very helpful when prioritizing what to tackle first.   You can expect future budgeting content to include:

• Budgeting tools (DIY and Apps versions)
• Lessons learned and tips for success
• Catalysts for spending less on food
• Grocery pricing comparisons
• Creating a vision and goals and linking your budget to them