Secrets to Budgeting Bliss

As a financial coach, I have clients asking me about retirement planning (“We’ll get there one day, right?”), college education savings accounts (“How are we possibly going to afford it?!”), and improving credit (“The outstanding balance just snowballed...”) almost every day.  And almost every one of those topics leads me to ask the question, “Do you keep a budget?” No matter the situation, most of my clients (and about half of the country) respond “no.”

As a busy parent, budgets are not likely at the top of your to-do list. But, in an expensive city like Chicago, you really can’t afford to not have a plan. You’ll know exactly what you can afford, how much you can spend, and you can alleviate some of the anxiety money causes.  Less money arguments? Sign me up!

There are many different ways to keep a budget. The key to making this all stress-free is finding one that works for you. Try one. If it’s not working, try a different one. Don’t give up. Find a plan that works for your lifestyle and multitasking personality. Here are a few of my favorites:

• Online Tools:  Since we all have the internet in our pockets/purses these days, this could be a no-brainer for you. Sites like www.mint.com and www.learnvest.com aggregate all your financial accounts and allow you to see your net worth (simply what you owe minus what you own) and spending trends. The tools try to classify the expenses in the right categories but sometimes make mistakes, so it’s a good idea to periodically review them.  For example, whenever I get groceries at Treasure Island, it gets classified as a hotel.
• Ditch the Cards: Research shows people spend significantly less when using cash compared to credit cards. By carrying cash only, you force yourself to stay within your predetermined limits. Buying a first birthday gift? Feel you should spend less than $30? Bring $30 and make yourself find a gift that works.
• Multiple Accounts: Consider making two automatic transfers as soon as you get paid: your fixed costs (like your mortgage, cell phones, daycare, etc.) into one account and a predetermined amount to your savings account. The amount left in your original checking account will be your spending money for the month. For example, if you have an income of $1,500, fixed costs of $900, and a savings goal of $200, you will have $400 left in the original account. Feel free to spend the remaining $400 guilt-free! You’re already paying your bills and setting funds aside for your goals so you’ve got nothing to worry about.
• Spreadsheets or Journals: Most roll their eyes at me when I suggest this method. However, spreadsheets can help you track all your expenses in a format you create. It forces you to record the actual amount you spent. Could be an eye opener (instead of an eye roller) to see how much money went where!

Remember, it’s all about baby steps. Small savings make a big impact and creating a budget will help you get there. Saving just $20 a week will add up to over $1,000 in a year.  Save that $20 by taking advantage of Chicago’s many free activities: going to Lincoln Park Zoo, our wonderful lakefront, and free museum days. But, don’t forget to include some of your favorite guilty pleasures when budgeting.  An indulgence-free budget is about as useful as no budget at all!

Posted on June 05, 2012 at 8:57 PM

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