My husband and I have always been good stewards of money. We have avoided consumer debt, saved 20%+ of our income each year, and paid cash for our (used) cars. Early on in our relationship, we had what we called a budget. It was an Excel spreadsheet that we used to log expenses each month. We were diligent about logging our expenses, and we enjoyed reviewing what happened each month. As long as we stay out of the red, we’re doing great! We thought that because we were saving a lot of money, that we were in a great place. What else could we possibly do to be better stewards of money?
We didn’t realize it at the time, but what we were actually doing was tracking our money. Tracking money is a very passive, retrospective activity. Yes, you are accounting for where the money went, but you are not telling it where to go. We thought we were living on a budget. We were wrong.
For the past year and a half, we have been using a budgeting software called YNAB. Now, we tell our money what it’s going to do, instead of wondering what the bottom line will be that month. It is so refreshing to know what the plan is.
Of course, life is imperfect and unpredictable, which is why the budget is not static. Throughout the month, you are calibrating your budget to account for over or under spending.
Here are some of the huge wins I have felt since using this software:
- We reduced our food spend by 37% each month.
- We don’t feel guilty about spending money. We even allocate “free money” to ourselves each month. That money is ours to do with what we want. New shoes? Fine. Goodwill treasures? Go for it. Spa day? Enjoy!
- We don’t have to wonder about how we’re doing, because we can see where we stand every day.
The word budget is associated with not having money, or not having enough money. I find that it’s quite the opposite. A budget is a plan. You tell your money what it’s going to do. It holds you accountable and helps you accomplish your financial goals. You could be making $2MM/year, and I would still recommend having a budget.
So, maybe we just need a different word for budgeting. Money planning? Money mapping? Cashflow strategy? Earnings plan? Something else.
Let me know if you have any ideas.
In the meantime, start budgeting!