Monopoly Money

I know talking about finances can trigger worry or shame for lots of us, so I promise to keep things shame-free and totally approachable. Now, let’s put together a budget! No matter how many experts I talk to, or books I read about finances, they all seem to agree that having a budget is THE KEY to achieving financial health.

Ben Blair and I have used budgets off and on throughout our marriage, but I can’t say we’ve ever been super consistent. We tend to create a budget whenever we’re going through a big transition (like a move), and then we end up sort of ignoring it after awhile. (Oh dear!)

Since I am admittedly not a budgeting pro, once again, I turned to experts to get some solid advice on this topic. I talked to two accountants. One is Dan Brown. He’s been the accountant for me and Ben Blair (for our businesses and for our personal finances) for the last 6 or 7 years, and he’s one of our most trusted sources. I also called Alex Fishler who works for Square in San Francisco. I go to church with Alex and he’s awesome!

Monopoly Money 2

On getting started:

The first thing is knowing what your spending patterns are. (That’s the bookkeeping!) Once you know your patterns, take some time to figure out if you’re spending your money the way you want to be.

The best thing to do is define what your goals are. Do you want to retire early? Travel? Pay for school? You need to understand what’s important to you, then aim toward that.

On budgeting tools:

Use software or an app designed specifically for household budgeting. Or if you like to do it yourself, you can even build your own spreadsheet using something like Excel or Google Docs. If you go for an app, look for one that will sync with your bank accounts, with things like Turbo Tax, and with your investments (like Mint.com).

If you’re really struggling to get a handle on your finances, a really common way for new budgeters to master their budget is going to a cash-only system. You label an envelope for each category in your budget, put in the allotted cash for that month, and when it’s gone, it’s gone! It’s a great way to learn financial discipline and to master your spending weaknesses.

On checking in with your budget:

If you’re new to budgeting, checking in more often helps you keep it at top of your mind, and more important, it helps you focus on your goals. Start with 30 mins a week until you get the hang of things. You’re checking in to figure out how you’re doing relative to the budget you’ve set.

Once you’re more disciplined about keeping to the budget, checking in monthly, and eventually quarterly, is fine.

On categories people often forget:

It’s easy to forget about expenses that don’t happen monthly. Most budget are designed around monthly payment, so if you pay your car insurance in a lump sum once a year, you might forget to add it in to your budget, and it will surprise you. Related, little things come up. Little things come up on an irregular basis — remember things like back to school shopping, anniversary gifts, birthday gifts, and travel.

It’s also easy forget about future purchases that you know are going to come, but you can’t predict exactly when they are going to happen. Like repairs and maintenance, or replacing appliances, or replacing tires on your car.

And don’t forget savings! Start saving as early on as possible. Time is on your side as far as saving goes. While you’re at it, save for more than one category — there are big purchases like a down payment on a home, but also remember long-term savings for retirement.

One more: don’t forget to save for emergencies, like in case you can’t work.

On budgets that fail:

Budgets fail because people don’t understand what they’re really spending. They are unrealistic about they can afford or not afford. Maybe you think you can get by with $200 a week for food, when really, there’s no way you can get by with less than $300. Food is the hard budget category for many people.

The other thing that makes budgets fail is that people try to tighten up too much on certain categories. They completely eliminate “eating out” or “entertainment”. But if all of your friends are going out for coffee everyday, and you never go, you’ll be miserable and won’t feel like sticking with your budget. So build in opportunities to “treat yo-self”.

If you need to satisfy an urge to shop, add something to your Amazon wishlist, knowing you may never buy it. Just adding it to the wishlist give a certain satisfaction.

On traits of great budgeters:

Check in with your budgeting often enough to see if it’s working, and to make adjustments within your income. Don’t cheat on your budget. Don’t use your credit card.

It’s important to keep your goal in mind and be working toward that. If you have a specific goal, it’s easier to forego the small things to achieve the big goal.

It can help to make things into a game. Progressing, and watching your bank account grow, and seeing your money stay yours. It’s satisfying! Figure out how to reward yourself when you meet your goals. If it’s a chore, you won’t do it, so make it fun. Plus, it’s easier to stay on track if it’s enjoyable.

On talking with your partner about money:

It’s so important to engage in those conversations with your significant other!

When you’re in a spot where there is little discretionary income, it’s important to talk often about budgets to keep things on track. When you have a big purchase coming up (like a big trip, or a car, or an investment), it’s also important to talk more often. If you’re both focused on the same financial goal, frequent talks don’t matter as much.

Talk with your partner in a serious way about big picture financial goals a couple of times a year.

One technique that works when two people are learning to combine their incomes is to put both paychecks into a joint checking out, then pay yourselves an allowance into private separate accounts. You can use that “allowance” however you like without having to consult with your spouse. One might like to save theirs up for a big ticket item, while the other might spend theirs on movie tickets or concerts.

On a budgeting philosophy:

From Dan — It’s important to me to save a good percentage toward for retirement. I also like to set aside money for giving (for charitable causes). Be realistic about purchases that have an ongoing cost (like houses and cars) — it’s not just a one time purchase. Most of all, live within your means!

From Alex — I save 20% of my take home pay. That’s important to me. I know not everyone is in a position to do that, but if you are, saving more than 10% is a really smart thing to do. I also try to invest most of my savings — I don’t keep much as cash, it might as well be earning money. Also, live a moderate lifestyle to achieve fiscal health. For example, don’t get the biggest house you can. I’d rather retire 10 or 15 years earlier than live in a giant house.

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Thank you so much, Dan and Alex! I really loved the suggestion of adding things to your Amazon wishlist when you need to fill a shopping craving. I’ve done something similar at Target. Sometimes I put things in my cart that I know I’m not going to buy. It’s satisfying to acknowledge their beauty, and to “own” them for a bit as I walk around the store. : )

Okay, Readers. Let’s talk budgeting! Do you keep a budget? If not, have you ever tried? And do you want to try again? Also, what are your favorite apps and budgeting tools? For those of you who LOVE budgeting, what do you do to make it fun, and to stick with it? For those who dread budgeting, what is the hardest part?

Share all your favorite tips, please. I’m sure we all want to whip our budgets into shape!