Budget is an ugly word. It scares a lot of us because it means endless hours keeping, finding and organizing little scraps of paper. I thought so, too, for so very long. The more I’ve read on pf (personal finance) blogs, articles and watched TV shows like The Suze Orman Show and Til Debt Do U$ Part, the scarier it seemed. Record every transaction , even the .55 cent soda at work? I don’t have time for that. Who does? I kept track of the recurring, regular payments I made per month. I thought it was enough.
It wasn’t until I began banking online that I realized – all my transactions are already gathered and organized. All I had to do was download them into a spreadsheet. At first I tried sorting the transactions myself by making a column for categories and doing it that way. I sort of liked it, but I wanted a pie chart or graph or something to let me visually see how much I was spending where. A plain spreadsheet can’t do that.
So I searched for free financial or budget software that imports Quicken files (how my bank exports, though they also offer .csv). So, so much easier to import my transactions into software, rather than manipulating them myself. The one I’m most happy with is http://www.gnucash.org/. I did have to manually select and categorize all my check transactions, but it was pretty easy as I only write checks to about 10 companies, and I found a few misplaced transactions (like Baskin-Robbins in my income. Cool!) I like the report function a lot. I can see my cash flow for any set amount of time (a week, month or the whole year). It does have the option to do your banking directly through the software – transactions, bill payments and transfers. I didn’t register that part of the software, but it looks to do business transactions and stock portfolio reports. If I had a stock portfolio, that might be a neat function.
In my search, I did come across many recommendations for http://www.mint.com, which is an online budgetary site. Again, I didn’t want to link my banking information directly into any outside software or web site, so I opted not to try Mint.
I tried to find a budget spreadsheet with some reporting/graphic capabilities, just to see if any of them could do as well as gnucash, and I found one. The best by far is PearBudget. The online version of PearBudget is different – it costs $3 a month. The spreadsheet is free, but it is a LOT of manual labor. You can input each transaction by day and month, but since I just wanted a snapshot of what I’d been spending, I started at day 1 of each month. The category breakdown and the analysis the spreadsheet provided shocked me.
My regular expenses, such as mortgage, cable bill, insurances and landline phone bill were fairly stable. They should have been static, but I discovered my landline phone bill fluctuates by a few pennies every month, and my cable bill has crept up slowly over the past year. I do paperless billing and those two are automatic payments, so I rarely look at them. The analysis showed me that I need to look at every bill to make sure I’m being charged correctly and question any changes.
My variable expenses were all over the place, as I suspected, but seeing the hard numbers shocked me. It’s the gas and eating out and doctors and the ATM withdrawals that dissipate into the ether that I should monitor. Yes, I knew this, but seeing it finally made something click in my brain.
But how do I go from knowing to doing something about it? I can try to expect what I’ll spend a month, but I can’t set it in stone. My doctor co-pay totals vary HUGELY per month and there’s no way to budget – except maybe I can. Take the highest paid amount for one month and then set that as the limit. At the end of the month, if I haven’t used that allotted money for medical expenses, I should immediately send it to the credit card company.
Could it be? Could “crunching some numbers” actually give me a plan to pay down my debt faster? Would I be able to pay more per month, now that I know how much I historically spent?
I realized something very, very important when I was attempting to organize my spending. I thought I was paying $200 to my debt every month. In truth, it was closer to $300, though not consistently. Color me surprised! So, I’m going to be very brave and try something:
On payday, I’ll pay the next batch of bills that are due, then I’m going to move $100 to savings. EVERY PAYDAY. I can always move some of the savings back into checking if I’ve cut myself short, so I don’t really need to panic. I’ll need to make sure I’ve accounted for the two automatic payments that come out of my checking account every month (I don’t trust myself to have enough money in the account for more automatic payments than that). But if I can sock away $100 or a portion of it every payday, and I get paid 26 times a year – WOW! That would more than pay off one of my credit cards! And I don’t have to wait until I have it all amassed: if I transfer that money every few months into checking and then immediately send it to the credit cards, another WOW!
I’m feeling so good, I may actually try the ‘envelope’ system/budget I’ve been reading about. For those expenses that vary each month, you take out cash and put it into separate envelopes (yes, actual envelopes. You could use the ones that come from all those credit card offers you refuse to apply for). Label them ‘gas’, ‘grocery store’, ‘restaurants’, ‘gifts’ or whatever you spend money on that isn’t a regular expense. You can do this weekly or monthly, though I’m going to do it per payday (every two weeks). Since I know historically what I’ve spent on food and gas, I’ll average a year’s expenses out per month and label that money for those expenses.
I’m back to being scared – what if I need more? What if I can’t stay within the limit I’ve set for myself? That’s where my safety net (some call this an emergency fund) comes in. I do have a buffer, so if I eat out more than normal, or I see a great Christmas gift on sale (shop in Sept and Oct to avoid the end of year money crunch!), my expenses are covered. It may require more online banking than I’m used to doing, but if I can apply even more of the “Where did my money go?” money to my debt, it WILL get paid off faster. I’m still on track for a three-year payoff, but I’m determined to do it in less. I CAN do it in less, as long as I’m aware of where my money is going each day/week/month. Who knew budgeting or spending plans could actually be USEFUL?
Maybe attempting any sort of budget will help me. I don’t know yet. I now know (and not relying on my guesswork) what I’ve been spending, but to predict what I WILL be sending is a scary process. I do have some savings, so if I grossly miscalculate, I do have my emergency fund. Not much of one, but it is there. I think I’m beginning to understand why tucking some savings away helps you, not hurts you, when you’re paying down debt. If you miscalculate or overpay or overdraft, you have some money to throw at it. If you’re worried that the budget won’t work for that week/month, you have some money set aside to boost up what you do have.