The Money Series. Budgeting 101

The Money Series. Budgeting 101

Welcome to a new series on the blog. I created it to share with you all the experience, tips, and lessons we learned in the past few years regarding money and budgeting. And if you like the post, take a look at my e-book here – it’s an encyclopedia of money-saving tips.

Our money story

When Alin and I met, we were both in a terrible financial situation. I think we made it even worse after we started dating. Both of us had an overdraft attached to our debit cards, and he was still paying for his car. We were in debt, and we considered that to be the norm. Every single month during payday, we were stuck in front of the computer, refreshing the screen to see when the money got into our accounts. Horrible feeling!

Budgeting 101. How to organize and plan your expenses every month to maximise your savings and reduce debt. At the beginning our your personal finances journey? Start here.

What triggered the change

We used to go to bookshops on weekends, and on one occasion a particular book got our attention – The Total Money Makeover by Dave Ramsey. We bought it and little did we know that it’s going to change our lives forever. I read it first and then passed it over to Alin hoping that he’s going to accept my proposal to try to implement what the book said. Two days later, he said yes, and the journey started.

The concepts are simple:

  • the only person that can change your life is you;
  • live with less now so you can live with more later;
  • and tell your money where to go instead of wondering where they went.

In the book, Dave Ramsey talks about seven baby steps. We completed the first three steps but working on the other four here and there (except for the house payment cause we’re still renting). You can read them here, but I’ll talk about them in separate blog posts.

We think that the first three steps are the most important and eye-opening ones:

1. Save an emergency fund;

2. Pay off debt;

3. Save 3-6 months worth of expenses.

But there’s also step 0.

You have to know what you’re spending money on. For now, don’t do anything but gather information. Do this exercise for an entire month, but keep your spending habits intact. Why we love budgets? Because we can clearly visualize where our hard earned money is going.

It's easy to ignore the problem if you don't see it. Click To Tweet

You can do this as simple or as complicated as you’d like and I’m going to provide a few ideas – a budget sheet, a budget printable and a phone app that you can install.

1. The most straightforward thing you can do is just carry a notebook with you and make a shopping log – write down everything you spend money on.

2. If you want to improve this a bit and if you also want to involve your partner (especially if you have a joint account), you can install Wunderlist on your phone, create a shopping list and share it with them.

Alin and I use this app for both shopping log and groceries list – every time one of us spends money (doesn’t matter how much), we put it in the shopping log. If we remember we ran out of something, we add it to the groceries list, and the other one receives a notification. We always know what’s missing and what we need to buy next time we’re shopping. And we know if one of us got takeaway for lunch (unless they’re ashamed and don’t put it in the log).

3. A piece of technology that it’s brilliant when it comes to budgets is Microsoft Excel. This is what we use to have a visual of how the month went – how much we spent on each category; if we went over budget; if we spent much more than we had expected on a particular subcategory etc.

I attached below the exact excel document that we use and pre-populated some cells so you can see what it can do – it does the math for you, it tells you how much you spent on each category, how much you saved, you much you have in total if there’s also a savings account, etc. Have a go and let me know if you need any help or you have an individual requirement – I will be more than happy to edit it to fit your needs. This is a document we updated and improved for the past five years.

4. Going back to pen and paper, I also made a simple version of a planner that you can print. You can fill in the expenses that are known right at the beginning of the month. Then you can plan for the flexible costs and see if you can achieve your goals.

5. Apps that connect to your bank account. They tell you how much you spend, give you statistics, send you reminders if you’re running low on cash, etc. I tried Money Dashboard, available in the UK. Give it a go; it’s free and secure.

What does the budget contain?

Both the excel doc and the printable are self-explanatory, but just in case they are not, here’s what you have to think about.

What are your fixed expenses? It’s usually rent, utilities, car payments, but everyone has a different situation. For example, we have child support and pet insurance, but you might have life insurance, car insurance, pension plan, etc. You can use your online banking account to find everything you pay by card or direct debit. For whatever you pay in cash, I suggest you use Wunderlist or pen and paper to write down what you buy. Otherwise, it’s easy to forget.

If you want to make a plan for the flexible expenses, always set a little bit of money aside for emergencies, entertainment, takeaways, etc. If we plan to avoid all these, we set ourselves unrealistic targets, and we will fail. Even if you try to save as much money as you can, thinking that you won’t eat lunch out at least once is just lying to yourself.

More info and printables

I explain some of these in the video below. This is my first attempt at vlogging, so be kind!

Interested to read more? Have a look at my e-book, “The Smart Girl’s Journey to Financial Bliss“.

And get all the printables and spreadsheets I’ve been talking about through the image below.

Just click the image to download all the documents!
Get all budget planners on email, for free!

 

Let me know if this was useful and also if you’re using any other tools for budgeting!

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