If you’ve ever been told, “You just need to make a budget”, then hear me when I say that these well intentioned words of “advice” (insert sarcasm emoji here) is about as helpful as a mosquito bite on your ankle. *Bombastic side eye.*
My parents are both really talented people. My mom is a master tailor. She can do any kind of alterations – and I mean ANY garment – she also can draft patterns based on a person’s specific measurements. My dad can build and make just about anything out of wood, and repair all sorts of stuff. Growing up in this kind of household meant I developed some really great fine motor skills, which I do not take for granted. Because my parents are so talented, I grew up learning how to use tools appropriately. They showed me how to safely use all sorts of craft supplies and woodworking tools when I was old enough to listen and follow their directions. And of course, they watched me the first few times I did anything.
If budgeting is a tool, like a hammer or a sewing machine, you can’t just start using those things without a little bit of instruction. So why do we tell people to use the tool of budgeting without any instruction at all? Just assuming that everyone knows how to do it naturally?
Budgeting, at least to my mind, is a tool that requires a few bits of knowledge from our journey up the Money Mountain.
First, you gotta know your real numbers. I don’t care how good you are at the task of budgeting – if your real numbers aren’t reflected in that budget, it’s not gonna work. But you also have to understand your goals and circumstances. What is it that you’re trying to achieve with your money? What situations might you encounter that can impact what your real numbers are doing? Creating a budget without knowing your real numbers and your goals is like getting out a hammer and a wrench before ever deciding what you’re building. Are you making a birdhouse? Building a fence? Replacing a sink in the bathroom? When someone says “oh, just make a budget”, it sounds like a person that says “oh just use a hammer” when you tell them that your bathroom has flooded.
You have to get clear on foundational levels 3 and 4 of the money mountain before we ever start using a budget seriously.
A budget is meant to be a close estimate. You don’t have to get every little expense right in your budget, but you should get within a reasonable range. The first time you make one, there’s a good chance it’s going to be off quite a bit – but you’re hopefully in the ballpark. As you practice, you’ll get better and better, and more and more accurate.
There’s a ton of different ways to budget, and not every style of budgeting is going to work well for everyone. I knew someone that loved percentage budgeting – loved it. They put 50% towards their necessities, 20% went to savings and investments, and the other 30% is what they lived on. Cool. Great. Someone else might prefer more of the zero-based budgeting method, where you give every dollar a job, and consistently track your income and expenses. That’s great too!
My own budgeting strategy has evolved and changed over time. And that is a very good thing. The budget you make at age 25 or 30 won’t look like, and SHOULDN’T look like the budget you make at 40 or 50. Your budget should pivot and change as you grow and change. When I first started budgeting, I was tracking every penny (which worked really well for me), and carefully allocating for every expense. But as I got more data over time, and more practice, I loosened up a bit. I don’t track every penny anymore, but I have a very clear picture of what I am aiming to spend at any given time.
Just like there’s different tools out there, and each person must choose the right way to budget for them.
So let’s talk about the six criteria of what makes up a good budget, regardless of what method you choose:
- It’s easy to use. What’s easy for one, may be really difficult and confusing for you, so take that into consideration. You want your budget to be something that isn’t so complicated or cumbersome that you’ll never use it. By the way, apps are great for helping you keep track of your budget and making it visual. But I will strongly argue that an app can only give you the information you feed it. And if you always forget to log into it or you’re not good at updating it when needed, well, that app isn’t going to be much more useful than good old fashioned pen and paper.
- It’s genuine to who you are. We are budgeting for the life and income we actually have – not the one we wish we had. When it comes to our real numbers, we don’t have to like them to have them be useful to us. If you are making a grocery budget of $50 a week for a family of five, babes, that ain’t gonna work. And it’s okay if you’re trying to cut back on really out of control expenses. So, start with reality, and then aim for small incremental changes as you get better at budgeting.
- It’s aligned with your goals and circumstances. If you know you’re going to have to replace the roof of your house in the next 7 years, your budget should reflect that – even if it is going to take you 7 years to save up 50% of that. It’s okay. And if your goal is to fly to Paris for your anniversary, your budget better have a category to reflect that. Again, the point of a budget isn’t to punish you – a good budget is a permission slip to get you closer to your goals through aligned action.
- It makes sense to your brain. I am a big fan of automating savings, investments, and anything else. I knew someone who had set up so many automations for themselves that they had a special checking account separate from everything else that they knew all of their fun spending came from. Whatever was in there each paycheck is what they had available to spend. Everything else was out of sight, out of mind, and they only checked on their automations once a month to make sure nothing fishy was going on. So their quote-unquote “budgeting” was figuring out what was coming up between each payday and what they were willing to spend.
- It’s flexible and personal. Your budget categories, meaning the specific areas of spending, should make sense to you and your life. If you need a “chicken coop maintenance” budget category, then it should be in there! I personally have a skincare and haircare category in my budget that is separate from my “manicure/pedicure” category, because that is what works for me. Heck, you can have a “spontaneous fun” budget category if you wish! When it comes to your budget categories, you can be as broad or as narrow as you like, but your categories should capture at least 90% of your typical spending.
- It accounts for due dates and deadlines. This is the last one because I think it’s one of the most overlooked criteria for a successful budget. Your budget isn’t just a spreadsheet of income and expenses. It should also be a timeline of when those expenses will occur. If you’re coming up short during a certain time of the month, it might be that you’re ignoring your payment due dates, or haven’t analyzed when those might be and how those dates relate to each other. Of course, there’s a lot of ways to address due dates for recurring bills, but even things like hey I’m going to be going to a friend’s birthday brunch on the 12th, but don’t get paid until the 17th.
Those are my criteria of what makes a good budget, but once you have made a budget, how exactly do you stick with it? Everyone’s a little different, but here’s what I think can help:
Tip #1: Make budgeting a pleasurable experience. My money routine, which includes creating my budget and reviewing my expenses from the previous month, is more palatable because I make it so. I have a nice beverage, I make sure I am in my comfy clothes, I have some music playing and the lighting is good. This is like a money date – if I don’t spend a little bit of time each month with my money, we’re not going to have a good relationship. So carving out 30 minutes a month to just open my accounts, review my expenses, double-check for anything out of the ordinary, and celebrate any progress I’ve made toward my savings and investing goals…because I make a point to make it as enjoyable as possible means it doesn’t feel like a chore. You can even enlist the help of a friend. Have a budgeting date night together over a glass of wine if that’s what you need to do. The point here is that you get to choose whether budgeting is a painful obligation or a pleasurable ritual. Personally, I choose the latter.
Tip #2: Use every tool in your arsenal. There is no reason to do math in your head if you are not good at it. I am not good at it. When I am budgeting for the month, I have out my calculator, my agenda book, my digital calendar, and the little coloring sheets I use to track my savings and investing goals. And of course, I have all my accounts open on my computer. There’s no budgeting merit badge for trying to make a budget based on memory or doing mental math. So make it easy on yourself.
Tip #3: Practice forgiveness and celebrate wins. As I mentioned earlier, a budget isn’t about laser precision, but about moving in the direction you intend. If you mess up your budget – please do not beat yourself up. For any fellow recovering perfectionists out there, my goal with my budget is 1) to stay out of debt, and 2) get at least a B+ when it comes to my savings and investing goals. That’s it. In the times where I mess up and spend money in regrettable or forgettable ways, I take a moment to sincerely forgive myself, and remember that I am a human. And when I make any progress toward my goals, no matter how small or insignificant it might seem, I take a moment to celebrate it. To remind myself that I am capable of achieving whatever I set my mind to.
Tip #4: Make sure your reason for sticking to a budget is actually motivating. Here’s the deal my friend – you could have the most beautiful, well-laid out, accurate budget of all time. But if your reason for sticking to that budget is an external obligation or because you feel like you “should” be doing it, or because you feel guilty, or because your partner wants you too…you’re not going to stick with it! There’s a reason that the second foundational level of the money mountain is mindset and values. Every level above that is made stronger or weaker based on your work in that second level. When you are motivated from a deep intrinsic place, sticking to your budget is gonna be a little bit easier. And that means working on things like regrettable and forgettable spending. That means understanding the stories you have about money. And having a really clear vision of why you want to make the necessary changes to your financial landscape. And if your vision isn’t super clear yet, if you don’t feel a deep hunger to work towards that vision, that’s okay! That doesn’t mean you’re destined to fail. But I would encourage you to really set aside time to fine tuning that vision. Think of it like going to the eye doctor and they do that thing with the lenses – which is clearer, one or two? (Can you tell I’ve worn glasses for a while?) Having a super clear and provoking vision for your life and how your money plays into that, well it should feel like putting on glasses for the first time. Suddenly everything is sharp and in focus.
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