Disclaimer: I am not a financial advisor. The opinions expressed in this blog post are simply from my experience of what has worked for my family. They are not intended to provide specific advice or recommendations for any individual. Before you make any decisions for you or your family, first speak with your financial advisor.
Please note: This post contains affiliate links. As a participate in the Amazon Associate Program, I may earn from qualifying purchases connected with these links. However, all opinions of these products are honest and my own.
Part of taking care of yourself is finding ways to eliminate stress from your life. Money is definitely a pain point for some people, but it does NOT have to be. My husband and I began budgeting shortly after we got married and have never looked back. Knowing that money can be a point of contention in some marriages, taking control of our finances and being fiscally responsible was incredibly important to us.
There are a few misconceptions to budgeting that many people need to unlearn. The most important and prominent one that needs to be unlearned is that budgeting is a punishment.
Yes, there may be times when there isn’t room in your monthly budget for an excessive purchase, but that doesn’t mean you can’t save for it the next month. Budgeting is actually a life hack. Budgeting allows you to live comfortably instead of paycheck to paycheck, save for those big ticket items that bring joy to your life and help prepare you for life’s unwelcome surprises – a traffic ticket, an emergency hospital visit, a broken home appliance, a car repair.
Benefits of budgeting
It is never too late or too early to start budgeting. Budgeting is for young adults, budgeting is for people living without a fixed income, budgeting is for people who are retired – it doesn’t matter what stage of life you are in, you can start reaping the benefits of budgeting NOW.
When budgeting, you first need to understand where your money goes each month. For us, we spent an exorbitant amount on ordering take out – even with a fridge full of groceries. If we kept this habit, we would not only fly through our restaurant budget, but we would also be wasting our grocery budget on food that goes bad before it’s eaten.
After finding out where your money is usually spent, you can identify the categories where you need to put your money. Groceries, mortgage payment, gasoline, electricity, car maintenance, home maintenance, restaurants, streaming services, phone bill. Then, you can decide where you want to cut your spending, where you should actually increase your budget and how much money you can save each month. For us, we decided to each have a manageable restaurant budget, put a little extra money toward groceries and put the remaining money into savings.
Choosing a budgeting method
It’s important to find the best budgeting method for YOU. There are two main ways of budgeting. There’s active budgeting and passive budgeting. For us, active budgeting is the most helpful method.
With active budgeting, you are tracking your dollars in the moment. This may sound petty, but it helps us make better choices because it keeps us on top of our spending as opposed to following behind it. For an active budgeting method, you can use a spreadsheet, envelopes, or of course, there’s always an app.
When passive budgeting, you are tracking what you spend in hindsight. This is like balancing a checkbook at the end of the month. There are apps that focus on this method as well. While it is better than doing nothing at all, this isn’t the budgeting method that worked best for us.
Our favorite budgeting apps
Personally, our family uses two budgeting apps – Y.N.A.B. (You Need A Budget) and Mint. Apps may not be for everyone, but these apps, especially Y.N.A.B., have been with us throughout our entire marriage. Y.N.A.B. is our go-to for active budgeting and Mint can be used for passive budgeting.
We use Y.N.A.B. to track every dollar we spend. Literally every dollar. This took about a week for me to get used to and I’ve been doing it now for 7+ years.
Here’s how budgeting goes for us. Before the month starts, we allocate money to each of our categories. We chose and labeled these categories ourselves and can have as many as we need. Some of our categories include groceries, utilities, mortgage, car payment, day care, home maintenance, car maintenance, car insurance, restaurants, etc. We also set aside a little money for fun each month. Once we have allocated money for these categories, we put the rest into savings.
If we have money left over in one of our categories as the month comes to a close, that money goes into the “to be budgeted” pile to be allocated accordingly for the next month. Using Y.N.A.B. and this budgeting method has allowed us to save enough money to be at least a month ahead of all of our expenses.
For example, all the money we will spend in January was earned in December. No paycheck to paycheck life – we can roll with the punches. When an emergency happens, we take comfort in the fact that the money we have to spend is coming from last month.
If you would like to learn more about Y.N.A.B., there is a Y.N.A.B. book about the app that explains the philosophy behind active budgeting and how to use the app itself. There is also a Kindle version.
Y.N.A.B. has yearly and monthly subscriptions. Even though there is a cost associated with the app, we have found that we save way more and benefit from using it. However, it is free for college students. If you would like to sign up, you can use my referral link – we both get a free month!
Instead of using Mint for passive budgeting, we actually like Mint’s feature of housing all of our accounts in one spot. It allows us to look at our whole net worth at one time. It is also an easy spot to view all of our transactions so we can ensure we haven’t fallen victim to credit or debit card fraud. We usually compare all of our transactions in Y.N.A.B. with those in Mint to rule out any fraud.
Mint brings together your checking account, savings accounts, credit cards, mortgage, car loan and more on one platform. It automatically categorizes your purchases, but there are times you may have to go and recategorize a purchase if Mint doesn’t quite get it right. However, if you prefer looking at your budget at the end of the month to see how you did, Mint might be a good option.
Realistic pathways to saving
A huge part of budgeting’s purpose is to be on top of your spending so that you can set aside money to save. Ideally, you should set aside enough savings for a comfortable emergency fund consisting of six months of expenses, which is different than six months of income. Budgeting allows you to identify how much money you usually spend each month. Saving six months of this usual monthly spend should be a big priority because you want to have enough liquid cash in case of an emergency. After this, you can put your extra income aside for vacations, investments, etc., but that is a post for another day.
The point is before putting all of your extra income into a fun category, pay your future self first. Do this so you can take the heat of life’s unexpected expenses with ease.
Setting aside 30% of each paycheck is a typical goal. If you can’t do that, any money saved is better than none. What we actually started with was the 52-week savings plan. We set aside $1 the first week, $2 the second week and so on until we saved $52 the last week of the year. This gave us $1,378 after one year – our first year married, first year out of college and first year with a fulltime job and taking full responsibility of all of our expenses. It’s a good start.
Budgeting gives you control over your life as there is no confusion where your money is spent. Budgeting can keep you from scrambling for a rent payment because you have already set aside money to pay for rent. Budgeting allows you to realistically save for vacations, down payments and emergencies.
If you spend more than you earn, you will never come out ahead. Retiring comfortably, giving your kids nice items, not worrying about credit card debt are all potential benefits of budgeting. Budgeting is a good way to keep control of yourself, to feel in control of your life and to feel like you can manage your stress.
Once you get into budgeting, you might be motivated to find other ways to save! If you’ve found other options, drop them in the comments!