One of the most tangible things I did to improve my personal financial state is to create and stick to a monthly budget. I get frustrated when I hear people talk about a regular budget as a punitive exercise because it actually becomes a very freeing experience once you get your shit together. Most people only use the phrase “I’m totally on a budget right now” when they are talking about needing to cut back on spending temporarily because they’re out of control or they suddenly need to pay back a debt urgently. It always seems to come from a place of shame. But I’m on a budget every single month and it’s one of the most important things I do in order to remain on track and continue to build wealth.

I view a budget as a road map of sorts, for thinking about and planning deliberately for your spending and savings goals. Think about another challenging life category, health – say you want or need to lose weight. Are you going to expect significant results if you pay no attention to improving your diet and exercise habits? Not unless you’re a moron. So, if you want to change the status of your finances, meaning eliminate debt and build wealth, you have to pay attention to where your money is going and attach some discipline to your spending.

I look forward to my monthly budget meetings because (a) I’m a dork and, (b) because it’s a built-in reminder of and motivation towards savings goals and it requires me to plan ahead for that month’s unique expenses. A day or two before a new month begins, my husband and I sit down for 15-20 minutes to discuss what’s coming up and create the next month’s budget. This month, for example, we have had THREE trips. All things planned, and fun stuff, but not free. So, we needed to allocate much more money to the vacation/trips line item than usual. Had we not met to plan out the month, we would have risked spending way more than intended without a plan. There are fewer HOLY SHIT WE NEED TO DIP INTO SAVINGS TO COVER THAT SPONTANEOUS ELEPHANT RIDE scenarios.

We use a Google spreadsheet doc to house our monthly budget. I would recommend this method because you always know where it’s located, it doesn’t require emailing a document back and forth, updates happen immediately upon entry (no manual saving required unless you have OCD), and we can both hop in and out of it at any point assuming we have an internet connection. We have one large document with multiple tabs – one for each month. We also use the space to house some bigger picture plans such as our plan to build wealth (more on that in a future post) and other miscellaneous calculations we tend to make.

The top of our budget includes 3 lines for income – my salary, hubby’s salary, and a miscellaneous income category in the random occasions we’re gifted money or if we sell something. The rest of the budget includes our expense categories:

  • House payment
  • My Roth IRA
  • Husband’s Roth IRA
  • Savings
  • Satellite
  • Internet
  • Cell Phones
  • Gas & Electric
  • Water
  • Car Insurance
  • Security System
  • Dry Cleaning
  • Car Gas
  • Grocery
  • Restaurants
  • Bars, Music, Movies
  • Vacation/Trips
  • House Needs
  • My Haircut
  • Husband Haircut
  • Miscellaneous
  • Netflix
  • Vehicle Expenses

We do a zero-based budget, meaning every dollar has a spot (even if that spot is “savings”). I’ve been using our Google doc method for almost three years now so I plan to continue doing so but if you’re looking for a free way to get started, Dave Ramsey has a newish tool, Every Dollar. A lot of people use Mint.com, which also provides free software for this purpose.

Quit making excuses and start a monthly budget TODAY. At the very least, start tracking your spending for the next 30 days – I guarantee you’ll be shocked to see where your money is going and you’ll find a quick way to redirect some wasteful spending.

Be thrifty with whimsy, my cutie pies!