So I first have to start by saying this “how to” post is not an overnight process. Living on a budget comes with a lot of up front preparation and then consistent discipline every day. If you are not currently living on a budget then the changes you will need to make may feel drastic. However, once you have a plan in place and you begin to see your savings grow, you will realize it is worth every sacrifice.
Where do I even begin?
Although each of us carry a different financial load from one another, the number one place to begin is to start by writing out your goals. My husband and I like to write goals out for the short term and long term. We look at 1 year goals, and then write out 3-5 year goals. When we first got married, we even included a list of 10 year goals.
To begin, these goals may include items like: pay off credit card, pay off student loans, save for a new wardrobe, save for vacation. If you are in debt, apart from your mortgage payment, I would highly encourage you to add these to your list of goals to get rid of first.
Once you have established your goals and spent some time dreaming of life with the financial peace you are looking for, it is time to begin writing out the plan.
The Plan: Zero Dollar Budget
First, you must take a look at your monthly income. How much do you bring in a month? How much do you spend a month? If you don’t know how much you are spending each month, don’t worry. Once you establish your budget you will be able to track this and make changes moving forward.
The Zero Dollar Budget is a simple plan. Basically, it means that you allocate every dollar in your income every month into a category so that every dollar is accounted for and there are “zero dollars” left to chance. For many years, I did this through my own Excel document that I created. I kept a list of categories such as Housing, Groceries, Medical, etc. and managed the outgoing expenses through formulas. Then, I found a much simpler way!
Every Dollar is a simple budget tracking system that is customizable to meet your needs and helps you monitor your monthly expenses. It is so easy to use and since it is web based, plus a featured app, you can access your budget anywhere. Just plug in your net income for the month and then you can adjust categories for spending in the template or add your own. As you add your spending into each category, a graph is illustrated to show the percentage of your income being allotted for each area.
Time To Save
Now that you have your goals and a plan in place, it is time to begin the real work! As I mentioned earlier, discipline is key. To start, I would recommend keeping up with all receipts. Schedule 3 or 4 days a week to set aside time as “budgeting” time. Use this time to input your spending into your Every Dollar categories and monitor your progress through the month. The more you know about your spending, the more power you will have to stay in control.
As you begin to work this process, you will come across challenging hurdles. Such as, “I never realized I spent so much on groceries and eating out. How do I adjust this without starving my family?!” While there are many suggestions that I have that I will post soon, it’s important to know that there is always a way to beat your budget and adjust your spending.
Stay focused and disciplined. Week by week and month by month you will begin to see progress. You will see your savings begin to increase and even learn tricks to help you reduce certain costs of living. When the day comes that you are debt free and able to make financial decisions that give you choices you will be so happy with your discipline.
My Living Proof
This post is only generated from real life experience! The experience of anxiety over debt with credit cards and student loans. The experience of cutting up credit cards. The experience of downsizing our house and driving older cars. The experience of saying “no” to invitations for girls’ nights or vacations. The experience of pressure in our marriage over finances and the discipline of under-spending.
UNTIL…the day came and we began to pay off credit cards. We paid off not one student loan, but two student loans. We bought a new car with cash. We lowered our mortgage payment below $1000 a month. We increased our giving and saving each month. And most of all reduced the stress within our marriage.
You can do this too! Follow these simple steps and keep reading for spending tricks that I use to manage a simpler lifestyle.