Home Budgeting

My brain is funny. I assume without a second thought that because I do something everyone must be doing it. Even if I haven't been doing that something for very long. I only started using a budget in May '07. Now it's become so familiar to me I forget that I haven't always used one.

I think it started out as a way to balance the checking account (debiting account, really) without having to use the little checkbook ledger. As I added more categories and features it became a way to balance the account and control and track spending. One of the things that's great about a budget is that once you've made the decision to change the amount you spend on a certain category per month, you tend to get irritated at the budget, not the budget maker, if you have to control your spending more than you would like. Once everyone agrees to abide by the budget then spending decisions become easier. Is there enough money left in the budget for the thing you want? No? K, you don't get to buy it this month. If you still want it next month you can get it then.

The picture I posted above is a screen shot of the the actual spreadsheet I use to track our monthly expenses (don't worry, I changed all the numbers). Here's how it works: the Budget column is updated at the beginning of the new month. The bold numbers remind me what has been budgeted for each category so I can enter that number at the beginning of the month. Throughout the month, I add expenses into the Actual column roughly once a week to track expenses as they occur. The Diff. column has an existing formula that subtracts Actual from Budget to let me know how much is left to spend in each category. The rollover from one month to the next is a little more complicated but that's basically it. I created this spreadsheet in Excel and have tinkered with it a bit but it's pretty basic. I'm happy to email it to anyone that would like it and provide more instructions for how to use it.

The budget provides a couple other benefits besides balancing the checking account and having a better idea of where your money goes. Some of the categories I've added, like Car Expense, are purely for rolling over from month to month. We don't actually spend the entire amount budgeted in Car Expense every month. Most months it just rolls over. So we build up a small savings for car repairs over time. Most of the other categories don't roll over so at the end of the month I either transfer that money to a savings account or use it to make up differences in categories that we went over in (small overages are common). Another benefit is goal setting. If I have a new goal, like paying down a higher-interest loan faster or going on a vacation, I can add a new line in the budget, change a few numbers around and after a few months of no other conscious effort my goal starts to materialize. Sometimes I make a hypothetical budget to see what a change in jobs or salary would do. Seeing where your money is being spent may also reveal habits you didn't know you had. I spent half my paycheck on fast food?!? Ack.

Budgeting isn't exactly fun but it only takes about as much time as balancing a checkbook. And when you think about the amount of time you spend making the money, the amount of time you spend ensuring that money goes to support your goals is well spent.