Have you ever tried budgeting?
Be honest with me. How well did it work for you? Did you give up in a fit of rage and frustration, Bruce Banner?
Apparently it doesn’t work so well for most other people either. Only about 30% of Americans actually have a real, physical budget. And I’m not just talking about saying “Oh, gee Bob, I can’t
We all know budgets are important. Our parents tell us from a young age that when we grow up, we need a budget, just like we need to eat our brussel sprouts, make our bed, and put our toys away (things I’ve also failed at as an adult).
Related post: 5 Great Financial Lessons From My Parents
I’ve tried budgeting in the past. I even bought fancy-pants programs for it. I sat down, all excited and ready to start carving my path towards making my millions, and I allocated out my monthly income among each of the categories listed.
Savings? Of course I’m going to put most of my money there! Who wouldn’t? Bitch, please.
Don’t Set Unrealistic Budgeting Expectations
That budget went over about as well as a fart in church. Obviously, I created a budget that was entirely unrealistic for my situation. Some people make it work, but for me, following a budget where I put all my money in savings just didn’t work. It would have been the financial equivalent of going from riding the ponies at kiddie birthday parties to racing in the Kentucky Derby.
My budget failed for a lot of other reasons, too. I didn’t take the time to make sure the way I was spending my money the way I really wanted. Saving money has always been hard for me, and I didn’t really have anything set up in place to make sure I was successful at saving money. I didn’t set any goals.
I thought that after I started following the budget, it was a permanent, rigid, iron-clad contract that would make any cell phone carrier proud, and any deviation from it meant immediate and total failure.
I’ve learned a lot about budgeting in the past year. Life threw us a financial curveball, and we had to readjust the way we thought about money or forever wallow in a pit of doom and despair, Edgar Allan Poe-style. One of the best things we did for ourselves to climb out of the pit was to start a budget. Not just any budget, but a real working budget this time, that had ways to deal with all the things that made it unsuccessful in the past.
I went through several steps to start up my current successful (so far, at least) budget. This will be the first post in a multi-part series designed at breaking down the steps I used. I’ll show you exactly what I did in simple, easy-to-follow steps.
Why Look At Current Spending Patterns?
Before I even started thinking about drafting a budget, I needed to know how I was already spending money. I needed a baseline to start from.
There are a few reasons for this:
- I needed something to compare future spending with so I could point out how awesome future me would be.
- I needed current spending patterns to base my first budget draft off of.
Remember going from kiddie ponies to Kentucky Derby horses? You can build up to super-awesome-saver mode, if you want. Right now, though, you need to start training yourself from where you’re already at.
In other words, you need to look at your current spending patterns so you can create your first budget draft based on how you already spend your money. Otherwise it’ll be too much of a shock and you’ll give up. Ask me how I know.
What You Need to Track Your Spending Patterns
To get started, let’s gather up a few things:
- A couple of hours
- Three months of past bank statements, credit card statements, and/or receipts for everything you’ve bought.
- Spreadsheet, pencil and paper, or some other way to write things down in categories and tally up the totals
- I suggest a nice Runoff Red IPA by Odell’s, but if you’re a wine, cocktail, or even sparkling water person, feel free to grab your beverage of choice.
Categorize and Tally Up Your Expenses
Now that you’ve got everything together, let’s follow these steps:
- Figure out what categories you want to track. These are the categories you’d use to classify each expense in your budget. Don’t worry—you can always change the categories later (we did), but for now just come up with a list of basic categories. These are the categories I used when I first started:
- Utilities (electricity, cable, internet, etc…)
- Fuel/Auto repairs
- Dining out—total, and weekday lunches for me and Zach
- Student loan
- Auto loan
- Go through your statements and tally up each purchase into one of the categories. This is where it’s handy to have a spreadsheet, so you can just tally it all up underneath each column. Otherwise, just write it down and add it up by hand with a calculator.
- Tally up all of your income. Everything. Every last penny from your day job, side job, night job, or horizontal job.
- Drink beverage of choice.
That’s it! You’ve just finished your first step towards starting a successful budget. That wasn’t so hard, was it?
What Do I Do Next?
Congrats! This is the first post in my Budget Like A Boss series. For more info on how to set up a successful budget step-by-step, check out the other posts below:
- What Are Your Current Spending Patterns? <- You are here!
- Set Kick-Ass Financial Goals
- Create A Budget
- Track Your Spending
- Create A Badass Money Saving Plan
- Adjust Your Budget
Dude! Were you as surprised by your current spending patterns as I was? Leave a comment below!