Welcome back to the debt free journey series. This is part four, but don’t forget to check out part three of the series. The topic for today deals with the main component of our debt free journey. Budgeting.
A budget is a plan for your income. The budget is basically your blueprint for spending and saving. Budgeting allows us to make conscious decisions about what we would like to do with our money. I have gone from hating the budget to feeling like I cannot live without it.
We started budgeting when we went to Financial Peace University. Almost everything that we were taught in the course made perfect sense to us, so we started our budget immediately. Before the budget, we had no idea where our money was going. We always got upset that it never seemed like we had enough money. Now, we are completely in control of our money. We tell our money where to go and we stick to the plan.
The most important thing to remember when starting to budget is to budget to zero. This does not mean that all money needs to be spent. It also does not mean that you will have zero dollars in your checking account. Now our budget may look a little different from yours because we live on last month’s income, but I will talk more about that in a future post. We start by putting the total amount of money that we made last month at the top of the page. Next, we begin to put our money into categories. When we put money into categories, it gets subtracted from the number at the top. We keep assigning money to categories until the number at the top reaches zero. This is called a zero-based budget.
The next thing to think about when budgeting is to budget anything new money comes in during the month. You will also need to track all spending. Since we don’t use our money in the month that we actually make it, we take all new money and put it in a “buffer” category. If you do not live on last month’s income, be sure to give any new money a job (category) as soon as it comes in. As far as tracking, be sure to subtract any money that you spend from the category where it resides. Otherwise, you will not know how much you have left to spend in each category. This sounds tedious, but there are plenty of budget apps that will make this process easier. I will talk more about the budget app that we use in a future post.
The last thing to remember when budgeting is to make sure everyone that is spending from the budget has access to view it. I know that there will be situations where one person is not good with tracking and the other one enjoys it. In this case, it is fine for one person to subtract all receipts from the categories. The point is to have the budget up to date at all times. This makes spending and tracking so much easier.
Budgeting is the number one thing keeping us on track throughout this debt free journey. I have actually found joy in making sure the budget is up to date and assigning jobs to our money. My husband is not as excited as me, but he does enter his transactions (or tell me so that I can enter them) and check the categories before making any purchases. This is a big help. Budgeting makes debt tracking and payments easy and we love knowing where our money is going. I hope that this post inspires you to start a budget. If you have any budgeting questions, sure to leave them below.