Friday, January 6, 2012

To Be Frugal: A New Year, A New Budget

Whether you are just now sticking your toes into frugal waters or hoping to take your frugal habits to new depths, a budget may be necessary.  Yes, a budget.  How many of you have one?  I mean a real budget.  One that is written down on actual paper or a spreadsheet.  It is completed prior to the month starting, and includes your project income and a direction on how that income will be spent.  When the month ends you reconcile, determining if you really did "stay within" budget.  A family budget has been apart of my marriage since we were engaged.  We each brought our own budgeting style to the relationship and now have a system that works well for both of us.  We often joke that our family finances are more like a business than a typical family.  The upside, we have our thumb on financial matters.  We control the money, money does not control us.
Photo credit: www.sxc.hu - free image

As we ushered in a new year we also ushered in a new spread sheet.  This year we are using Google Docs because we can both edit the document and monitor it to see if we are spending appropriately as the month progresses.  Along the top are the twelve months.  Down the side are expenditure categories.  First come the fixed expenses: housing, transportation, groceries, medical, child care, repair and replace, one-time charge, and fun.  The end of the list contains our various savings goals: health savings account, retirement, 529 plans, emergency fund build up, and extra towards the mortgage.

The way we control our money is as follows.  We enter the expected revenue for the month.  Since we are both self-employed there is a bit of guesswork involved, but we have a pretty good idea of what to expect.  Then we enter the anticipated expenses for the fixed categories; this is always less than our projected revenue.  The remaining balance is then directed at a savings category.  This year we've elected to max out our health savings account first.  Then tackle our retirement amount.  And so on as we work our way down the list.

A budget not only helps us control our spending, but it also reminds us of our goals.  Minutes before putting together the January budget I had been talking about an appealing new CSA I had learned about.  The cost was $300, and we were leaning towards a purchase.  After putting together the budget I had changed my mind.  We are serious about knocking out our savings goals so that we can pay down more of our mortgage.  I'd rather have a debt free home than a CSA.  I will still enjoy locally grown veggies this summer, I am just going to pay for them then and not now.

And that is how a budget helps this frugal person stay frugal.  How many of you do a budget or are willing to start?

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