I just finished a finance test last night. I'm glad that it is over and that I did pretty well on it (at least I think I did).
At work, this month, we have been creating our department budgets. All of the number crunching and prognosticating inspired me to discuss living my own life on a budget.
In my own recent experience, my wife and I have just begun to live on a monthly budget. We started this past January as a sort of quasi-New Year's resolution. Each month we sit down and "pre-spend" or earmark our income. Our budget has several categories, some are compulsory, like bills, medicine, groceries, and gasoline. Other categories are "flexible," meaning if there were an emergency, we could live without them. Some examples of these categories are clothing, entertainment, and eating out.
It is amazing how planning your personal finances in this way can give you complete control over your money. Before we started doing this, my wife and I got by pretty well. If a bill came in the mail, we paid it. If we wanted to go out to eat, we did. We didn't keep track of our money. Why should we? We felt free.
But when we started this budget, we realized that we had not been free. We had been spending like drunken sailors. We hadn't saved much and we were buying a lot of "things" and "stuff" we didn't need.
As we started writing down the way we wanted to spend our money, we began to discover where the money was going. It was actually quite liberating to be able to have such a command of our money. We knew where each and every penny was going and that enabled us to begin to make long-term plans.
I'd be interested to know what you think about budgeting? Do you budget your money? What keeps you accountable? Post a comment and let me know.
4 comments:
I've been using Quicken or Microsoft Money since my early college days - when I barely had any money to keep track of. Still, I've always been fascinated by where that money was spent, how it compared to other categories of expenses, other months, etc.
Budgeting is discipline, and discipline is essential to good financial management. You're right - it IS liberating. It makes decision-making so much easier. I can't imagine not budgeting.
Last August my wife and I started using a new budget system called the Envelope system. We had been using Quicken since before we got married but the biggest problem was it was too hard to find out exactly how much money we had left to spend in each category. Our financial lives have changed. Like James, we would pay the bills when they come in. One that would always surprise us was the car insurance bill. All of a sudden we would have to come up with $700.
We purchased a budget program for the Mac (there is a version for the PC too). It is called Budget (http://www.snowmintcs.com/products/budgetmac/) This Budget program works based on the Envelope system. This sytstem takes your paychecks and splits it up into all of your envelopes (budget categories). If you would rather work on paper, you can still do this system. My father in law does it using columns on paper. Each envelope has a column and when he gets paid, he adds money to each column.
By using this system we have been able to pay down our debt and also save for big expenses like a new furnase and a kitchen overhaul. We never would have been able to acomplish this without committing ourselves to living within this budget.
Thanks for posting guys.
I've heard about the envelope system. I'm guessing that the program divides your money into "envelopes" and then when that money is gone, you just don't buy stuff from that envelope until the next paycheck?
Agent Disco: I use Quicken, too and have been since college. It's a great tool and if you haven't looked into it or a similar program, I would recommend it. Go to http://www.quicken.com to learn more about it.
Oops! I was also going to say that I use Excel to work on my budget. I like how I have it set up so that if I change a number, everything else adjusts automatically. That must be the creative person in me, I think.
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