The New Year is coming! So many people have an idea of how they want to overhaul their life in the New Year. Some want to lose weight, be healthier, start a new business, or get a handle on their finances. Let me tell you, I have been in EVERY one of those camps. And many of those resolutions did not work out for me because I made unrealistic and drastic changes that I could not sustain. So here is an idea that has worked for me and MIGHT work for you. Start small. Small changes, lead to big results.
I bet you are like I am, a super busy person. And a complete overhaul of your life is not something that is going to stick. It just isn’t. Too many changes, too fast, results in the inability to keep up and for me, quitting. It takes 21 days to become a habit. So for me, I commit to something for at least 21 days. Using this method, I have made many changes in my life. Can you use this method to track your expenses and look at your budget?
If you are reading this I know that you are a little bit interested in getting a handle on your finances. Maybe you feel out of control and feel the need to change how you spend. Maybe you are living paycheck to paycheck and have no emergency fund. Maybe you know that you need to change, but are avoiding it. I get it. Change CAN be scary, but no big payoff comes without a small change. I know how scary change is, because I know that change is WORK. Even if you don’t start January 1st, think about what it might feel like if you didn’t have any debt. Envision your life and where life might take you if you had the financial freedom. There is no greater gift to give yourself.
Some simple steps to budgeting in the new year below.
1. Write down your monthly income.
2. Underneath your income, write down your monthly expenses that don’t change. These would include, mortgage, rent, electricity, daycare, gym membership, any subscriptions, car payment, and any other bills.
3. Next, write down your expenses for the month that vary. These would include gas, groceries, eating out, clothing, pocket cash, etc. This is the tough part. We had no idea what we were spending on these expenses. When you first get started, your budget may not work and you may go over what you budgeted. That is okay! It took us roughly 4 months to get a balanced budget that worked for us. In our first month, in our budget meeting, we decided that $50 would be what we would spend eating out for our family of four. We quickly adjusted when we ran out of money after one meal out.
4. Do the math. Subtract all of your expenses from your income. If you are negative, it might be time to think about what you can cut out. Can you cut the cable? Take your lunch to work? Curb your Starbucks habit? Along the way, we noticed that Shawn was burning through his pocket cash for the month in two weeks. During a budget meeting, he let it slip that he was going out for lunch every day, which is not healthy for him or our budget, while I was taking my lunch every day.
5. If you happen to have money left over, you will need to decide what to do with the leftover money. For us, the first two years of Dave Ramsey were us skinning our budget so much so that we could send every extra dollar to our debt snowball. More on that later.
As you work on your budget, track what you spend month to month. We used the paper-pencil method for the first year and then Dave revealed “Every Dollar”. Everydollar.com is a website where you can make a free account and budget online.
What worked for us: We both get paid every two weeks, so our budgets are for every two weeks. We pay separate bills and I know what bills will be paid out of my first check and what bills will be paid out of my second check. I give myself cash for the two weeks at a time. That cash has to last and I have to be conscious of what I am spending. Dave says using cash is important because it hurts when you use it. He’s right. 🙂 Maybe you need a weekly budget if you get paid every Friday. Do what works for you!