February 20, 2019

Budgeting doesn’t have to be stressful

You might find me completely crazy for saying this, but there’s a lot of times that I will choose not to grocery shop or shop for other things if I feel like my budget is out of alignment or that I haven’t visited it recently enough. If you’ve ever spent any time considering your personal finances you’ve likely heard the Dave Ramsey slogan “A budget is telling your money where to go instead of wondering where it went”. I find that when I operate without full knowledge of what’s happening in my budget it causes some internal anxiety and stress in me because it feels out of my control. It makes me feel like I’m just making random decisions instead of operating within set safety rails.

So, since I’m currently in the middle of teaching another round of Financial Peace University I thought it made sense talk a little bit more about simplifying our budgets here on the blog!

I’m going to help you take your budget from stressed to simple.

First, let’s talk a little bit about what a budget is and what a budget isn’t. The word budget can elicit some not-so-good feelings especially if it’s something that has not been a part of your life. Possibly, it’s something that has been used to control you or restrict you. But, there’s freedom in a budget when you understand the purpose behind it and how to use it properly.

I read this meme today that said, “a budget takes the fun out of money” and of course I instantly rolled my eyes and thought that guy is definitely broke! I prefer the quotes that tell you that “if your broke friends are making fun of your financial plan you’re probably on the right track”.

Did you know that the majority of people around you live paycheck to paycheck and are one emergency away from being in a really tough spot and likely racking up tons of additional debt? The idea of living without debt and giving yourselves parameters in which to operate in goes against all societal norms. People won’t get it, it’s convicting and there may be some push back.

The idea of just creating a budget and holding firm too it may feel impossible and make your palms sweat a little but hang with me for a few and I will show you how to make it simple and easy.

The first thing we need to do is understand why we’d want to make a budget in the 1st place.

I did not grow up in a family that talked much about money and I never learned the idea of a budget. As a matter of fact, I never thought much about money at all other than the fact that I knew we had it and we never seem to run out of it. My husband was on the flip side of that and was raised in a household that was very budget conscious. When we met and got married, we were on opposite ends of the spectrum when it came to our finances. But because neither of our families explained much about planning for finances in a marriage, we spent the first few years spending without intentions or plans for our future and we paid for it.

It was one particular year after we had finalized the tax returns that we looked at each other and thought “where did all this money go” We really didn’t have anything to show for it.

And then the other shoe dropped as they say.

Shortly after, my husband lost his job when he was laid off from a company that he had been with for 12 years. They closed their doors unexpectedly. We had a nearly 1-year old daughter at the time and I was making barely over minimum wage working at a photography studio. I remember feeling scared and anxious. I remember my husband kind of shutting down and withdrawing from our life. We felt so burdened by how we would get by and it took months for him to find work again. That stress stole precious time from enjoying our new family and it’s time we will never get back. If only we had been more prepared.

To be completely honest this stress and the anxiety that we had in those moments are so far in the past that I hardly recall the exact feelings that surrounded them because we’ve made such drastic changes in the way that we handle our finances since. It feels like it was a lifetime ago and I am so thankful for that. It’s what drives me to share and teach this information to other people. I want everyone to feel the type of freedom that we feel now!

Four Scores and Seven Years Ago

About 7 years ago we heard about and took our first Financial Peace University class. Over the course of 9 weeks, we had gained all the tools that we needed to be able to communicate about our finances, about our struggles, and about our goals for the future. We began making a budget every month and saving diligently for the goals that we had. I even avoided stepping foot in Target for months {GASP} just to make sure that my spending habits wouldn’t fall back to how they once were. Yes, I am the spender of the family. I still am and will always be.

I would be lying if I said it was easy. Friends, every budget meeting was a fight for awhile. I felt convicted about my overspending and each question about a purchase felt like a personal attack. I think this is one reason that couples struggle to have these conversations but in the end, they are worth the struggle to push through.

It took a simplifying and decluttering journey to finally clear my bad habits

The truth is that even though we had been working a strong financial program for 7 years, my desire to buy things to bring myself joy did not stop until I began my decluttering and simplifying journey. (you can read more about that here) That was a heart change and a whole ‘nother story!

Before you dive into creating a budget it’s really important that you take a few moments to think about your future goals.

How do you want your life to look like in 5 years, 10 years, or in retirement?
What type of legacy do you want to pass to your children?
Would your life look different if you didn’t live paycheck to paycheck?
How would it feel if you didn’t stress about what to do if a financial emergency arose?
How much anxiety or worry could you alleviate simply by having a plan for your money now and into the future?

I want to see all the places, he doesn’t.

My husband’s not a big fan of travel. The idea of gallivanting all over the world in our retirement does not appeal to him in any way shape or form. But we both enjoy nature and outdoors and agree that there’s a lot of places within the US that we would like to see later in life. I could definitely see us rolling around in an RV with no particular plan yelling at each other over directions! Mainly though, our financial goals for our future are centered around spending time with our family. We want to be able to take our kids and our grandkids on trips and make lasting memories with them. So, we work backward. By having an idea of what we want to save and what that means for our current spending, we set a goal moving forward. It’s a roadmap that we won’t argue about in our Dr. Scholls.

A budget really is like a map that gets you where you want to go. Without it we are essentially just wandering aimlessly. And when you wander aimlessly chance are, you’ll fall off a cliff or run into a wall – neither is very fun, and both can be avoided just by looking where we are going.

OK, so here’s the tough love.

Come on, you knew I was going to have some for you! My friends always call me the tough love giver. I’m not sure if they like it or not but hey, that’s who I am so that’s what I do.

My word to the wise is this: in order to create, stick to, and even have the desire to create a budget to live by you need to be pretty honest with yourself.

You have to be honest with yourself about what stuff means to you. You must be pretty brutally truthful with yourself about how you think about your appearance to others and what matters most to you. Is it a big house, fancy car and brand name clothing or knowing that you will never have to stress or worry about your finances?

Do you really believe in the idea that if you sacrifice a little now, you’ll be able to live later in a really big way?

Living on a budget doesn’t have to mean that you can only have one or the other but, it might mean that for right now. They call it ‘financial freedom’ and that very well may lead to a big house and fancy car and a great pair of Jimmy Choos but, if you’re struggling to stay afloat you’re not really living your best life. If you’re living that way to keep up with everyone around you, who is probably living that way to keep up with everyone around them, then you’re not being true to yourself or who you were created to be.

Truth time.

My name is Kelly and I like stuff.

via GIPHY

I imagine that most people think that since I’ve been on a journey of decluttering and simplifying my life that it means that I’m not a fan of owning stuff. Friends, please!!! I love a great throw blanket and a new pair of shoes as much as the next girl. Owning stuff is not wrong. It does not make you bad or irresponsible but when you must spend the majority of your life scrambling to make ends meet or even just working longer hours to pay for the things that you have, then you’ve allowed your stuff to own you.

When we are slaves to our jobs and to our paychecks so that we can have more things in our lives, we’ve kind of missed the big picture.

Life is so much grander than the things that fill our shelves, our closet, and our drawers. It’s about the memories that we make, the people we meet, and the lives we change. If we can’t fulfill the potential that God gave us because we’re too busy working to keep up with the Joneses, then we will never find the true joy in becoming who we were called to be.

For me, the decluttering journey means that I’m more intentional about my choices when I buy things. I spend more time thinking about what I’m bringing into my home and whether it’s something that I truly need or if it really makes me happy. For too many years I purchased ‘stuff’ to fill a void and bring myself temporary happiness. But that never works in the long run.

OK, I’ll hop off my soapbox now and let’s talk about the practicalities of budgeting.

The first thing we need to do is have some idea of how much money were actually spending.

Step one is to print all your bank statements and credit card statements and begin to comb through them and categorize your monthly purchases. Then, total up the amount you spent. Think of things like gas, groceries, eating out and clothing. You’ll probably have entertainment costs, medical expenses, pet care costs, and beauty and hair care. All of these are items that likely appear on the monthly transactions of your debit or credit cards. Having a better sense of how much you are spending, even though it can sometimes be painful to find out, is the quickest way to being ready to make a change.

If you just read this and thought of 10 other things you need to do first, your procrastinating and this is me calling you out. If you are putting it off, chances are you know you won’t like the answer. But, most of the time, the control you’ll feel by finally seeing the whole picture will make you feel relieved and organized.

Once you’ve done that, it’s time to look at your overall debt. Pull together all your statements including car loans, credit cards, student loans, home equity loans, medical debt and anything else that you owe money on – not including your home – and tally those up.

Now go get a glass of wine and breathe. It’s going to be okay.

via GIPHY

Finally, do an audit of what it actually takes to stay afloat each month. Start with the essentials and work your way from there. For us, this looks like our mortgage, utilities, groceries, and gas. For most people, this will also include a car payment. Don’t forget to add in any medical insurance that you’re responsible for or other taxes.

Once you have this number, subtract it from your total monthly income.

Then you have a choice to make. I use the word CHOICE very intentionally here because no one can tell you where to go from this point. You can choose to use every additional dollar to spend on ‘fun stuff’ like entertainment, eating out and buying new clothing or you can choose to use it to pay off your debts. Maybe you’re ready to create an emergency fund or invest in your future. You are solely responsible for this choice, which means you’re also solely responsible for your future. Don’t be fooled. Everything has an opportunity cost meaning, if you spend that money now you LOSE the opportunity to use it somewhere else later. When it comes to investing in your future, that could be a very big loss.

Now that you have figured out how much you have been spending each month, the total amount of your debts, and what it takes to really run your household, you’re ready to create your budget.

Getting to Zero

I believe wholeheartedly in the zero-based budget that is taught by Dave Ramsey. In this budget, you consider every dollar that you will make in any given month and you spend it on paper before you ever receive that first paycheck. You’re going to fill in all of the essentials first. Dave (yes, I’m on a first name basis with him) calls them your 4 walls.

First, you’ll add your giving or tithe if you do that and then you will add your expenses for your mortgage and transportation. This will include your car payment, fuel, and maintenance needs.

Then, add your utilities and your food. Essential clothing would fall next. (No, that super cute pair of workout leggings in NOT essential, even if they are on sale)

From there, you’ll need to decide what else must be spent that month and any remaining money should go towards paying off your debt. And if you are debt free (congrats Rockstar) then that money should go towards building a 3 to 6-month emergency fund if you don’t already have one.

A budget is meant to outline your spending for the month.

Surprise! This means that you need to check in with it weekly. If you went over in some categories (and you will) you’ll need to find the money in another one. Hint: if you find that you’re constantly going over in a particular category then you need to assess that situation. You’ll want to decide if your initial budget number made sense or if it was wishful thinking, kinda like my grocery budget.

Now, let’s revisit the idea that “a budget is telling your money where to go instead of wondering where it went”.

Guess what, you can still budget for your Starbucks trip, your hair salon and your manicures. Dinner with your hubby or your friends doesn’t HAVE to be off the table. Contrary to the resistance I hear, a budget doesn’t restrict you from doing the things you enjoy. It just set some guard rails to work within so that you can do them without guilt or stress that you’re hurting yourself in other areas.

But be real with yourself. If you’re trying to get out of debt, you’ll need to make some hard choices about what you’re going to give up to get there. However, I will say this again because it’s worth repeating. How you spend is ultimately your choice and how quickly you want to achieve that debt-free status or savings goal is up to you. But don’t let your future be stolen for the false hope of happiness that ‘stuff’ offers us. Or you end up having panic attacks, decluttering your whole house, being flabbergasted by how much junk you accumulated and writing a blog about it. (Or that might just be me)

Let’s wrap this up

Creating a monthly budget will undoubtedly take you from feeling stressed about your finances to being in control of your decisions. Chances are you’ll feel like you got a raise because you’ll have a clear picture of where your money is being spent. You might even find that you have more money than you realized! {insert Happy Dance here}

You’ll be able to start saving for those vacations you want to take and instead of bringing home a credit card bill you can just bring home relaxation and memories.

You can start investing for your future and planning what you’ll do when you retire.

You can ACTUALLY retire!!

You’ll have the freedom to give to those in need without worrying about making your own ends meet.