Don’t Give Up If You Need to Start the Budget Over

I’m the budgeting nerd in our family, but finding a budgeting system that works for us took several years. I had to start the budget over more times than I can count, especially when I was new to budgeting and managing our money strategically. However, the important thing is that I never gave up. We’ve been using You Need a Budget (YNAB) for years, and I haven’t had to start the budget over in at least five years. It can be done if you persist.

Now that the budget works for us, I tinker with it yearly. For instance, last August, we moved from Arizona to New York. These two areas have vastly different expenses. For example, property taxes in Arizona were cheaper, but the water was more expensive. However, now that we’ve been in our new home for eight months, I have a better idea of the actual expenses, so yesterday, I was able to redo our numbers so they’re accurate for this location. (I was able to drop the money we allocate for water, but I had to increase the amount we spend on food.) Tinkering with our budget once a year helps me create a realistic picture of our finances.

Do You Need to Budget If You Make Enough Money?

Before we get started on what worked for us when it comes to budgeting, consider the common argument some people make as to why they don’t budget, “I make enough money, so I don’t need to budget.”

Many DINKs fall into this category, especially if each spouse has a professional career and makes good money. Sure, making “enough money” is nice, but if you budget, you can make that money stretch even further.

Budgeting is actively managing your money and deciding how you want to use it by making conscious choices. When you don’t have a budget, your money isn’t working as hard for you as it could.

A budget lets you see precisely how you’re spending your money. For example, you may discover that you’re paying thousands of dollars for clothes and have many items in your closet with the tags still on. Is buying clothing that you never wear the best use of your money? You may not realize you’re doing this until you set up a budget.

Plus, budgeting helps you avoid lifestyle creep. Yes, as you make more you may want to spend more, but make sure you’re spending on items you find valuable, not things you’re simply buying without thinking about them.

What Ultimately Worked for Us

If you’ve tried to budget and failed, don’t give up. The best way to get a budget that works for you is not to give up. You will get the hang of successfully budgeting with increased practice. Also, these tips helped me when I was a budgeting beginner:

Tracking All Expenses for a Year and Dividing by 12

YNAB makes this easy for me. First, I run a report on a specific budget category and can see how much I spent over the last year. Then I take the total amount and divide it by 12.

If you haven’t used budgeting software long enough, go through your checking account and credit card statements to determine how much you spent on each budget category, such as groceries, gas, utilities, property taxes, etc.

Utilizing Sinking Funds

Sinking funds are a budgeting game changer. I listed all of my irregular expenses—those that were due only twice or once a year, and then I allocated money for them each month. For instance, my Amazon Prime account is due each February and costs approximately $139. I have an Amazon sinking fund in my budget, so I divide the total amount and divide it by 12. Each month, I set aside $11.59 for my Amazon fund. Then, when the payment is due, I have the money saved to pay it.

You likely can’t fund all of your sinking funds when you first start your budget, but as you get better at managing your money, you can. Having sinking funds makes budgeting even easier.

Before I budgeted, I used to have months when our car insurance was due. However, I had no money set aside, so I’d have to rob money from other categories like groceries. That month, we’d struggle to have enough food because the money went to car insurance. Creating and using sinking funds helps you avoid robbing Peter to pay Paul. It also makes life much less stressful.

If you need guidance, here are some of the sinking funds I have in the budget:

• Quarterly taxes,
• Costco membership fee,
• YNAB subscription,
• Car insurance,
• Vehicle registration,
• Home maintenance,
• Home improvement,
• Property taxes,
• Gifts,
• Computer replacement fund

Balancing the Budget Twice a Week

This may sound excessive for those who don’t like budgeting, but I’ve found that sitting down to reconcile expenses twice a week actually saves me time. The whole process takes less than 15 minutes.

How I Balance the Budget

I log in to all of my bank accounts. I add money that came in or went out to the budget.

Then, I look at our credit card accounts and manually enter expenses into YNAB. (You can have this done automatically, but I find it less confusing if I enter them manually and make notes of what the expenses were for.)

When I’m done, if I have shortages in any categories, I take money from a different category to cover the cost. When I first started budgeting, this happened frequently. Now, it happens less often.

At the end of the month, I reconcile the entire month, run a net worth report, and look at whether our net worth has grown or decreased that month and what the overall trend is.

Final Thoughts

Budgeting is an excellent way to tell your money what to do for you and keep track of your spending. If you’re a budgeting beginner, expect that you will need to start the budget over sometimes. That’s part of the learning process. However, as you gain more experience, you will no longer need to do this.

Read More

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