budgeting strategies
Last week we covered how to get started making financial goals. We talked about setting a meeting date with your husband, crafting long-term vision for your family, getting realistic with your yearly goals, and some things to keep in mind when you inevitably have to compromise.
This week we are going to continue our money discussion, but we are focusing on breaking those big goals into monthly realities.
Next week, at the close of our money series, I will share more of our personal debt-free journey with you and what it looks like on a daily basis to stay within our financial boundaries.
Ready to get into the details of budgeting? Let’s go!
Mike and I have used the same budgeting system for over 4 years with great success, but there are a few things to know before downloading the app and jumping in.
Whether your goal is to save more, give more, get out of debt, or spend less, you can’t reach your goals if you don’t have a clear picture of where your money is going right now.
The first step toward any financial goal is to take a detailed look at where your money is going each month. We all pay attention to our paychecks, but we aren’t always paying close attention to what and where we are spending.
Before creating a monthly budget, deciding which categories you need, and how much money needs to be in each one, we suggest taking 3 months to track exactly where your money is going. Don’t change any spending habits yet, but track what you are spending money on each month.
Chances are, you’ll be surprised how much you’re spending in certain areas.
Once you have a clear picture of where your income is going, then you can start to make smart decisions within your monthly budget.
How to Start a Monthly Budget
Because you are doing your background work and tracking what you spend for 3 months, the categories you need within your budget will start to reveal themselves. But if you still aren’t sure where to start when creating your monthly budget, here are our top tips.
1. Start with your income
Since military paychecks are fairly predictable, you should have a really good idea of how much income you have to work with each month. Every two weeks you know you have cash coming in. Start with this and don’t spend more than you have coming in!
We use a method called a zero-based budget, which simply means we start with our income and set aside specific amounts of money into various categories until we have nothing left in that paycheck.
Does it mean we spend every penny each month? No way! But each penny is accounted for whether it goes toward our mortgage, new garden supplies, or our retirement fund.
2. Essentials
Once you know how much money you have to work with each month, start with the essentials. Ask yourselves what your non-negotiables are each month. For us, those are: groceries, housing, utilities, transportation, clothing, and tithing.
Create a category and set a spending limit for each of these essentials. These totals will get subtracted from your income each month.
3. Needs
Once you have the essentials planned, create categories for your needs. Things that aren’t life and death, but that you can’t really live without. Things like insurance and childcare costs.
4. Wants
After you have your essentials and needs accounted for, it’s time to add in what you want throughout your month. Remember, you aren’t trying to punish yourselves. This is your money and you get to choose how hard it works for you, but if you have big financial goals, you may find yourselves having to sacrifice some of your usual comforts.
It’s important, during this step to ask yourselves questions like:
How often will we eat out at a restaurant each month?
Do we need to budget for clothing each month or just each season?
How many subscription services are we really using? Can we get rid of any?
5. Extras
Once you have done all this, you may have maxed out your income already or you may find yourselves with money leftover!
Anything leftover goes toward your specific financial goals. Are you working toward paying off debt? Is there a charity you want to give to this month? Are you saving for your kid’s braces? Create categories for each of these financial goals and any leftover money each month goes here.
6. Each month will be different
My biggest reminder to you is that each month will be different! You can’t create one budget and have it work forever and ever amen. Each month you will have to look ahead and plan accordingly.
Mike and I have monthly budget meetings, where we look ahead and decide if we need to set aside more for holidays, car maintenance, birthday parties, vacations, etc. This is no one-size fits all budget, but as you continue to track and stay vigilant, it becomes second-nature and you’ll discover rhythms about your spending habits.
How to Get Out Of Debt
If one of your big goals is to get out of debt, I won’t spend too much time on this topic in this post, but will point you to Dave Ramsey’s Debt Snowball method.
It’s amazing. It works. Trust his process. He’s been doing this a lot longer than we have and he knows his stuff.
Budgeting Strategies: That’s It (For Now)
Whew! That was a lot of intricate details. I know it’s hard and can feel overwhelming if you are just starting out. This is what works for us and I know it can work for you, too, if you are committed to finding financial freedom.
I’m excited to chat next time about our debt-free journey and share more daily tips and tricks with you. Stay tuned for next week!
Keep trusting Jesus with this process. He asks us to take good care of the things He has given and our finances are no exception. Be intentional. It’s worth it!
Resources we use:
Financial Peace University (now a part of Ramsey+)
EveryDollar App (we use the free version)