The past 6 months have gone extremely well for my wife and me. My job has remained stable through the tough times, I received an unexpected bonus and my blog income has been steadily increasing. Making ends meet is no longer a huge issue.
We first started seriously doing a budget last year because we were enrolled in Financial Peace University. It was required for the class that we come up with a working budget. Once we did our budget, we discovered that it really worked. We found problem areas in our budget, and were able to cut those areas significantly to save hundreds of dollars every month. We were finally telling our money where to go, not trying to figure out where it had all gone.
Over the past year we've been pretty good about staying within the constraints of our budget, but over time we gave in to a slow creep of allowing ourselves to go outside the budget every once in a while. After all, we're doing pretty well, right?
Getting Off Track
In a post that he wrote a while back, Larry at GatherLittleByLittle.com talked about the top reasons that people don't budget. One of the reasons struck home for me. Many people don't do a budget because their spending is already less than their income, and they don't think that they need to budget:
“I don’t need a budget, I have plenty of money left over each month” or “I already spend less than I earn and save the difference, I don’t need a budget“. First off, if you are saying either of these, kudos to you! Both of these statements are keys to wealth. Now, with that being said I ask, if you were on a budget, how much more would you have to save or invest? Don’t know? A budget would tell you.
This is the trap that my wife and I have been falling into the last few months. We've been doing well, our spending is less than our income, and we're able to save a little bit every month. At the same time, we've been falling away from doing our budget because we've been feeling secure in where we were. Without our budget and the accountability that goes along with it, we've actually re-started some old bad habits. We've started eating out more than we should, and spending money on things we haven't really budgeted for. We like being able to spend what we want, when we want.
The problem is, if we were on a budget, how much more could we be giving, saving or investing?
A biblical look at this subject can be found in Genesis 41 (thanks Miranda!) where it talks about Joseph. Joseph had become very powerful in Egypt, and times were good. They had 7 years of good harvests, but instead of resting on his laurels, Joseph planned ahead (budgeted) for the lean times he knew would be coming. Because he had planned when times were good, many people were saved. By the same token, if we plan ahead when times are good, we'll be able to ride out many tough situations that others might not be able to.
Getting Back To Budgeting Basics
Now that we've realized that our spending is starting to get out of whack, it's time to re-examine our budget, look at our spending priorities, and start focusing on our future goals again. How will we do that?
- I'll look at our spending for the last couple of months, and compare it to our old budget. By doing that I can figure out where our problem areas are. I'm guessing they're going to be in the same old spots – eating out and discretionary “blow money”.
- I'll update our zero based budget to account for our current income level. That way we can make sure that we're saving and giving enough. Also, we'll re-adjust the money allocated to certain categories in case we've under or over allocated money in the past.
- Once the budget is updated we'll have a family budget meeting to talk about our new revised budget, and talk about how much we'll be spending/saving in the important categories. Communication is key!
Doing a budget isn't always a pleasant process, but it is an important one. I believe it is one of the more important factors in being financially successful. Besides the financial success, it has some other pleasant unintended consequences including peace of mind, and creating unity in a marriage. That's something money can't buy!
Have you ever found yourself in a situation where you've stopped working on your budget because you're doing well and felt like you didn't need it any more? Once you stopped budgeting did the bad money habits start creeping back in? Tell us about it in the comments.