Kacie over at Sense to Save is hosting a Better Budget Challenge for 2008- and I'm participating, for now. We'll see how this goes! This week, we're just reflecting on our budget, seeing what our habits are currently.
1. How have you used a budget in the past? How did you set it up? Did you use a spreadsheet? Pen and paper? A software program? What are the nuts and bolts of how your budgeting system(s) worked?
As a part of a pre-marriage class, we got familiar with the budgeting process, but, because we had no jobs or realistic numbers, we couldn't put together anything meaningful. A priority after we got married & settled was getting together a realistic budget we could agree on. The budget is kept in Excel and on paper.
2. If you’ve never had a budget, how have you made decisions on how to manage your household finances?
The first 2-3 months we were married, we didn't have a budget because we didn't know what our expenses realistically would be. We made sure to keep track of what we were spending in each area so we could create a realistic budget as soon as possible.
3. How did you put your budget to work? Did you use a cash envelope system every month? Track your expenses and purchases in a database of some kind? How did you do it? How many people (i.e., you and your spouse) participated in that budget?
My husband tracks our budget on a per-paycheck basis, paying bills and allotting money to the different things we're saving for and transferring money between accounts. He keeps track of it all in an Excel spreadsheet.
We did and still use a cash system for parts of our budget- the Eating Out, Grocery, and Miscellaneous/Household Expenses categories. There is also an envelope for Credit Card, so if we ever are needing to buy something without cash from the envelope on hand, we put it on the credit card, then, when we're home, move enough cash from the appropriate envelope to the Credit Card envelope to cover the purchase (and make it clear that the money has already been spent!). Other parts of our budget we forgo the cash system- we pay as many bills as possible online, and I don't like going into gas stations, so we leave the money for gas for the cars in the checking account so we can pay at the pump.
4. In what ways did your budget (or lack of) work for you?
I've blogged about this before. There was never a question whether we'd have a budget or not, and the fact we have one has kept stress about money to a minimum, because we both know the status of our finances- that we have enough.
5. In what ways did it fail?
There was a stressful month in the last year where we were traveling and went off the cash system. This strategy did not succeed, and caused more worry than it was worth.
6. Think about your past experiences with budgets and your home finances. How do you want to use a budget in your personal finances? Do you want a system that you update every time you make a purchase? Every month? Do you want to have spending guidelines?
We don't micro-manage our budget. I want our budget to be a living document and able to change as our needs change- after discussion and agreement, of course. It cannot be rigid- but it must be guidelines we agree together to follow, so that both our minds can be at ease. Above all, our budget must reflect what's important to us.
7. What is your overall purpose in establishing a household budget? What do you hope to gain from it? Do you want to get out of debt? Have money to save or invest? Reduce your expenses? Have a better idea of where your money is going?
Our budget is allowing us to live off one income and pay off our school loans. Most of all, it is peace of mind. We're not out to buy gemstone jewelry or shiny sportscars, just be content with what we have.
8. Anything else you want to mention about your past or future budgets?
Recently we've learned that owning a house adds a lot more to a budget than mortgage, insurance, taxes, & PMI. We're adjusting. Also, I tend to be frugal with & budget both time and money- it may save us some money to play the CVS game and coupon like crazy, but it's more efficient to go to Aldi for practically everything at once, and the bottom line won't be that much higher.
Check out others' budget reflections over at Kacie's blog. For more ways to save money, check out this week's Make It From Scratch Carnival and the Carnival of Personal Finance!