I have a confession – I’m approaching my 40s, and I’m a first-time budgeter. And I’m embarrassed to admit it has taken me this long to start doing something I could have benefited from years (decades!) before.
Now – let me be clear, I’m not late to budgeting because I had endless access to cash. My husband and I bought a Fixer Upper (capital letters for emphasis) after the housing marketing crash and put a lot sweat equity into turning our little city bungalow into a beautiful home. As a result, our mortgage payment was extremely low. And since we were both fortunate to be employed, our low cost of living meant we didn’t have to watch our cash flow carefully, as long as we were being reasonable.
So last year, when I became a single mom and needed a new place for my young son and I to live, I came to the shocking realization that to buy my own house, in my own neighborhood, I would have to at least double my house payment. And with rent in our city being at an all-time high, that wasn’t a great option either.
After crunching the numbers, I realized the best choice was to buy, but buying a home on a single income meant I’d need to figure out a budget.
I got started by checking out a few articles on Financial IQ, which included everything from budgeting strategies to worksheets. I also had a budget worksheet from my financial planner (another recent addition to my life that I wish I’d had much sooner, but that’s for another post!).
I saw one strategy suggested over and over – write down everything you spend in a month. Many people do this by keeping a daily journal and writing down all planned and unplanned expenses each day. Instead, I chose to go to my online bank account and scrolled through the last 60 days of transactions. That helped me identify all of my monthly, scheduled expenses, but it also helped me see patterns in my spending (side note: There are apps, like the U.S. Bank app, that will do this for you. I’m old-school and enjoyed putting pen to paper for the exercise).
Some things I learned:
At the end of my exercise, I was able to find enough in my budget to swap to make me more comfortable with my monthly cash flow. It really helped me to think of “swapping” items in my budget instead of cutting things out. After making swaps, I don’t feel like I’m depriving myself, but rather spending my money on something that is meaningful to me – my home!
I also identified how much money I had left at the end of each month and started a short-term savings program to supplement my long-term (aka retirement) and emergency savings. It isn’t much, but it’s enough to make sure I can have some security, make some home upgrades and travel.
Finally, after subtracting my monthly expenses and savings, I have a true understanding of how much “fun money” I have each month, and which really helps me keep that “silly” spending in check.
Assess and develop a budgeting strategy that fits your financial life. Here’s a step-by-step guide to help you get started.