Notice, I said “feeling” poor, not truly being poor. Although, even truly poor people would benefit from a budget. Lately, our friends and family members have been sharing financial information with us out of the blue. One mentions never being able to get ahead, while another tells us they’re just getting by. Both of these friends have jobs and make money. However, a common thread among both people is they have no clue how much they spend each month.

Well no wonder you feel poor!

It blows my mind when people say they don’t know how much they spend each month. If you don’t know that figure, how can you confidently pay bills or live day-to-day without being sure you’re not going into debt? You can’t and that’s the bottom line. In the particular case of these people, one thing they have going against them is that they don’t share finances with their spouse. Each lives an independent, financial life not knowing where all the money goes that their spouse makes. When you have limited funds to work with, this is a recipe for disaster.

An obvious first solution for these folks is transparency; sharing finances with each other. Even if they want to keep their bank accounts separate, it’s important to know how much money is coming into the household. The next step is to track expenses. Once you know how much money is going out, then preparing a budget is key to getting on track with your finances.

Budgeting doesn’t have to be cumbersome, it can be as simple as dividing up income into expense categories – things that must be paid versus things that are “extras.” Let’s say couple A brings in $4,200 a month. They can divide their “must be paid” expenses, such as housing, utilities, debt payments, insurance, savings and car expenses into one group and groceries, eating out, and extra spending money into another. If their “must be paid” expenses comes out to say $3,000, that leaves them $1,200 to divvy up into the other expenses.

Notice, I’m adding savings into the “must be paid” category. Now, I can tell you that based on the conversations we’ve had with these couples, there is no savings category to speak of, but that’s partly because they have no clue where their money is going. Once they track their income and expenses, I’m guessing they’ll find they have just enough to also put something away into savings.

If they actually took the time to go through these three steps (that take some work, I’ll admit), they might find they’re not nearly as “broke” as they think they are with just a little perseverance. There’s no excuse for not budgeting!

How did you learn to budget? Is it cumbersome for you, or do you have a system that’s easy?

14 Comments

  1. I always advise to start your budget as simple as possible. If it’s new to you, then trying to incorporate a complex budgeting strategy is likely too much and will lead to failure. Start very simple and as you become comfortable and can incorporate the habits that come along, start adding a little bit more complexity to give you more detail or strategic gain.

    • @Money-Beagle – Simple is definitely a good way to start, especially for people who don’t know where to begin or think budgeting is a grueling activity.

  2. The budgeting part came easy, it’s living it that was hard at first. It opened my eyes to what we really were spending on before a spending plan came to play. In the first month of following the budget, it felt good but as months went by, it hit me that budgeting is really a lifestyle. I had never done it before, or had tried dieting, or anything that required a lifestyle change for that matter; so when we were “living the budget”, it took numerous adjustments until we’ve come up with one that truly worked for us. I used to have categories for everything, that was not easy to manage so now our budget is much more simple. Having a budget has helped us live truly and mindfully.

    • I’d have to agree – sticking to the budget is the harder part. It definitely takes some tweaking to get to the point where living the budget doesn’t feel like you’re depriving yourself of everything.

  3. I don’t know if I ever learned to properly budget, I have a general idea of how much I spend, but for me it’s just about not buying things that I don’t need. I guess that’s my only real budget, controlling my spending. If I do that then I don’t worry about the exact numbers because I know that I’m doing a good job.

    • @Zee – For some people, I think this method works just fine. For myself, it just doesn’t. I’m a bit of a control freak and I need to know where every penny is going, also I had a very bad experience with overdrafts years ago that I swore I would never suffer through again.

  4. I think keeping it simple is the way to go, which allows us to not get sick of budgeting. I think tracking expenses for 1 month can be a good exercise that allows us to cut out unnecessary expenses. Once we do that, and we have realistic handle on our expenses, it should be a lot easier to approach it in a simple fashion.

  5. I’ve been budgeting since I started making money. We’re still surprised by our spending sometimes when we catch up after a long time not tracking the budget. Sometimes knowing how much money you’re “wasting” on things you don’t really care about can be eye opening and can make the transition from pay check to pay check to living under your means a breeze.

  6. Jon @ Money Smart Guides Reply

    I agree with Money Beagle – start with a basic budget that you can follow and then tweak it as you go. The important thing is to get into the habit of budgeting and you only do that when you are enjoying it. Taking small steps and creating a strong foundation is better than just jumping in head first.

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