Making a budget is the least exciting part of managing money responsibly. Apart from perhaps paying taxes. The filing isn’t much fun, either, come to think of it. And standing in line to get money back from insurance companies, that’s pretty awful. OK, so there are many aspects of managing money responsibly that aren’t much fun. But making a budget is important. Even if it’s not much fun.
If you find you are refinancing your mortgage to get cash out every few years, you may actually be living beyond your means.
It is so easy to underestimate our day-to-day living expenses. The only way to really know where our money is going is to, well, really know where our money is going.
An easy way to start making a budget is to buy a little notebook, and record what you spend each day. Record the small things, like buying a coffee at the station, or the coins in the parking meter – those little things, done daily, can add up to a hundred dollars a month or more. And a hundred dollars is starting to get to the size of expense that matters!
It is important, in the early stages, that you don’t change your habits just because you are now writing everything down. Something about being watched makes us try to “straighten up and fly right”, doesn’t it?
Be your normal naughty self while you are writing down everything you spend. Take that cab when you could have waited for a bus. Take that bus instead of walking. It’s OK – you don’t have to be a saint to become wealthy. But you do have to be honest about it.
Make allowances in your budget for all the strange little expenses that you never would have thought to count. You will know what they are after you have written down everything you spend for a month.
Maybe other people also spend your money. This is a problem. I can’t help you there.
Just kidding.
If you can get them to write down everything they spend for the same month, it’s worth having a quiet celebration. You have a completely extraordinary family.
More likely, you will be able to get them to promise to write down everything they spend, but not to follow through with quite the level of accuracy that you would like.
This is normal. Breathe through the frustration.
If you can, take away all their plastic cards and make them take spending money in cash. You may not know exactly where the cash goes, but you can budget $150 per month for “random spending by other people” – and get them used to having a limited supply of cash and making it last a month. You may find that having to part with currency instead of using a plastic card actually reduces their spending in a natural way.
Once you know you are living within your income, refinancing your mortgage becomes part of a long-term strategy for getting out of debt completely, instead of a short-lived band-aid solution that makes the long-term problem even worse.
Making a budget is more challenging when you have several people involved, but it can be done. One thing is for sure – nobody ever got out of debt, became financially free, and developed the life of their dreams without making a budget. So it seems like it might be worthwhile, doesn’t it?
