Simplicity Can Streamline Your Budget

The following is a guest post from StretchyDollar.

Budgeting, in one form or another, is an essential part of financial success. Knowing where your money is coming from and where it is going will help you see the big picture, and keep things in perspective.

In the beginning, budgeting is a bit like trying to ride a 2,000-pound bull in a rodeo. Not only do you have to try and keep from falling off a huge galloping steer, but that same animal is angry and wants to kill you.

In all of your excitement to document the life of every cent you call your own, it’s easy to get overwhelmed, distracted, or discouraged. All three of those emotions are notorious budget killers – they’ll suck any desire to maintain your budget right out of you before you finish your first week.

Remember that keeping your budget as simple and accessible as possible will benefit your financial health in the long run. As with anything else, it can grow and scale up as you become comfortable with it. Here are some of the lessons in simplicity I experienced as we wrangled our finances into control with our attempts at budgeting.

Focus On the Numbers, Not the Tools

I remember shortly after I found my motivation to get our finances in order I spent an entire Saturday afternoon cruising around the Internet, looking for a tool my wife and I could use to keep track of our money. There are a variety of sites that match up with different styles and tastes, and I wanted the right one. Each tool has bells and whistles and is geared towards different audiences.

I wanted to use a website, but I admired the classy “old-school” feel of a spreadsheet. I was comfortable with Excel, too – so I knew that was an option. The only thing I wasn’t sure about there was how my wife and I would be able to both have easy access to it.

Before I knew it I had signed up for two different budgeting sites and tried to design my own budgeting template in Google Docs. Needless to say, we didn’t stick within our budget that month.

We tried different things, but ended up checking a couple of different sites, confirming that with the online statements provided through our bank, and then trying to reconcile a spreadsheet. Ha. Budget – FAIL again.

After a couple of months trying a few different things, we’ve finally figured out our system. We use an online budgeting site mostly to get a quick overview of all our accounts at once, but our budget has found a home as a spreadsheet in Google Docs.

In and Out and Where Is Good Enough

One of the things that intrigued me about the websites and other tools I was finding online was the depth of the information they provided.

I could find out how much I spent on gas each month (sure – useful!) how much I spent on the 16th of each month (remotely interesting), or even how much I spent on toilet paper compared to Americans (less than average – wonder what that means?) All of that information can be useful, interesting, or humorous on certain levels, but at some point, it just becomes clutter.

Tracking certain trends like month-to-month spending on groceries or average spending on “eating out” can be useful and help you find the things in your budget that are working and the things that aren’t. Past that, though, you really need to decide how much information you want.

If you’re able to stay focused on the basic information, you’ll spend less time staring blankly at your budget, trying to figure out how much lunch money you have left, and more time out doing whatever you like to do when you’re not hanging out with your budget.

Keep The Overall Goal In Mind

Your budget should govern your spending. If you’ve already spent your allotted amount of cash on “entertainment” for the month, you shouldn’t spend any more. Is it really a big deal to go over on your budget, though? Should you sweat every little time you go over a certain category in your budget? If it happens consistently, yeah, you should. That is an indicator you need to go back and re-evaluate your spending habits and determine if you need to make a sacrifice, or increase the amount of money you have to spend in that category.

Always remember, however, that your budget is like the Pirate Code – it’s “more of a guideline” (to quote Disney’s Pirates of the Caribbean).

If you’re under in some areas and over in others and the excess balances out the deficits at the end of the month, you’re doing well! Don’t sweat every little thing. Emergencies and mistakes happen, and are part of life no matter what you do.  Simple and dedicated focus on the end goal of keeping your spending less than your income will help you gain traction and move on to doing more with your money.

Comments

[Budgets Are Sexy]

Pirate Code or not, there's no doubting how sexy budgets are ;) I'm digging this post, good work!

[Jeff@StretchyDollar]

Haha - thanks! I'm glad you liked it.

[FindingFrugal]

The most intuitive budgeting software I've found yet is YNAB. If you haven't tried their 60 day free trial, do yourself a favor and go to my website and check it out or look to your left at FMF's button under GREAT OFFERS (see: 4 Keys to your cash flow). Seriously. It's even sexier then sexy, Mr. J. of Budgets are Sexy!! ;)

[Andy]

I think you are right, simplicity is key and you can't be a perfectionist. This is what I like about sites like Mint.com. It's really simple and just gives me an aggregated view of all my accounts and how I'm doing on my budget for the month. It's got a day or two lag as purchases clear at the bank, but the alternative is a system I won't keep up with. Also, if I want to try a new system, I know that my Mint account will continue to run on autopilot and I can always fall back on it.

[David]

Great guest post Jeff!

I agree 100% - simplicity is key. You're better off just getting started rather than making sure it's perfect.

I started out using Excel as a checkbook. Just enter debits and credits to figure out my checking account balance. Since then, I've added tons of my own functionality, including planning and some categorization.

I've tried Mint and a few other places, but it tends to give me too much info. The info is interesting, but tends to lead me towards mental accounting, rather than focusing on the big picture.

All I really need to know is:

1) Exactly how much money/debt I have in all my accounts at any given time
2) All bills/expenses (including savings goals) I have for the next two months

So long story short - I would start simple, then build on that as you need. It's a lot easier - and more accurate - than trying to guess everything you'll need in advance.

Good post again!