Do you budget?
I’ve never had a budget of the kind where you enter information in a ledger or spreadsheet and then analyze the data and make informed financial decisions.
I was married for a couple of years once to someone who meticulously tracked all that stuff, and I have to say it worked for him: he had loads more money than me.
I’m more of an “intuitive budgeter.” I avoid debt, pay my bills and credit card balances off every month, put a chunk away each month for savings, and freely spend whatever’s left. I don’t actually track any of these transactions, I just intuitively know if I’m spending too much and then I rein it in for awhile. There’s a natural ebb and flow to it, a rhythm that I find comfortable.
I know someone who takes a head-in-the-sand approach to budgeting. She just does not look at her finances: the more monstrous they become, the more doggedly she refuses to even glance in their general direction. She doesn’t open the scary mail. She doesn’t answer the freaky phone. She doesn’t file a tax return. She hopes it might all go away if she ignores it. But deep down, she knows it won’t and anyway she’s not ignoring it, not really. She’s tormented by it. She can hear it breathing in the shadows when she’s awake, and it sucks noisily at the edge of her dreams when she’s sleeping.
I know a few happy-go-lucky people who are serendipitous and carefree about money. They have absolute faith that the universe will provide. If they have money today, it’s today’s money. Tomorrow will take care of itself. La-de-da.
I also know people who don’t budget because they have no money. That makes sense to me.
My style – the cautious intuitive budgeter style – is being sorely tested by this house-buying thing. The house changes everything! (Not only am I never going to be debt-free again, do you realize I’m going to have to start paying for water?? I always thought water was free!) In the past I used to save up for a trip or a digital camera or a daguerreotype or some other fun thing. Now I’m going to save up for a roof. According to the inspector, I’ve got a year or two before the roof will leak. I’ve had leaky roofs before, and I would just phone the landlord (who usually weaseled out of actually DOING anything about it, but still.). Now if the roof leaks, it’s my problem in every way. And a new roof isn’t even fun. I’m too short to see it and admire it. The only good thing about it is that it hopefully prevents bad things from happening.
So anyway, I’ve had all these numbers swimming around my head lately…bi-weekly mortgage payments, utilities, taxes, heating, closing costs, maintenance costs, extra transportation costs, etc. The cautious intuitive budgeter is starting to have bag lady fantasies(which, interestingly, affect nearly half of all women, including those who were born rich and have always been rich). So I’m thinking maybe I’d feel better if I meticulously wrote down all the numbers in a giant ledger or something. And then maybe I could go back to my intuitive style of budgeting once I became more familiar with my house and its insatiable appetite for money routine expenses.
I see there are thousands of tools out there to help me get more financially conscientious. I could spend weeks trying them out. Maybe you can save me some time by answering some of these personal financial questions: What is your personal budgeting style and are you happy with it? (How) do you keep track of your finances? How much time do you spend on it? Does keeping track of how you spend change how you spend? Are there any tools (ie software, paper systems, books, etc. ) you would recommend?
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I used to keep all my financial accounts on the computer in Microsoft money. I would download info. from my bank and check it against my records and balance everything off. I discovered that this was causing me to fret. It was also very time consuming – I was wasting a good deal of my life so now I trust the banks and trust in life. If my statements show me to be down in any particular month then I am more careful the following month. I survive on contract work and never really know how much money is going to come in so I have little alternative to trusting in life. I don’t waste money and try to live within my means but sometimes I get in a bit of a panic and take on extra work. I know what my essential outgoings are and these are paid by direct debit or standing order. Sometimes I go overdrawn. Sometimes I use my credit cards.
Even though I used to make a living as a financial analyst, I’ve been a budget by the seat of my pants guy most of my life.
But… when money was tight…
I wrote down every single thing I spent money on for two months. This helped me control spending and it helped me plan.
And, when I became a freelancer and had my own version of the bag lady fear (in my case it’s the moving into my parents’ basement fear, which would also involve madness and insanity) I put my expenses and income into an Excel spreadsheet and kept a loose eye on things.
I put everything into Quicken, but I’ve never downloaded transactions the way Kat said. We used to track everything on paper, too thoroughly, but after many years, I just keep an eye on it as we go, knowing that we generally manage and that there is money in the savings account if necessary. I still track everything because otherwise I won’t have any idea why the Visa bill is what it is. etc. I forget details. I charge more stuff (almost everything,) but will always pay the entire bill. We’re probably more thorough than many. I think David’s idea is a good one, tracking for a few months, but since owning a house is new, you might need to track for longer. I have to admit I’d never go back to tracking on paper. Are you on a Mac? I think there is shareware for accts, but I’d have to ask around.
Try a simple spreadsheet and weekly updates to keep your eye on the ball, its a very simple and effective process and costs nothing.