Doing a budget has decreased our spending
Within the past few months my wife and I have started doing a zero based budget where every dollar is allocated before it comes in. When the paychecks are deposited each and every dollar is assigned a job, whether it be paying bills, groceries, personal spending money or savings. Since we give every dollar a job, money doesn’t just “disappear” in the ether, and we have more money at the end of the month.
We’ve been using the envelope system for problem spending categories as well. Sometimes, even when you have a budget, you inadvertently spend more than you should in categories like groceries, eating out or miscellaneous spending. Using the envelope system is helping us to eliminate those overspending problem areas. We have a set amount of money in our envelopes every month for those problem categories. When the money runs out, we can’t spend anymore. It’s a nice concrete way to control our spending.
Unintended Consequences Of Making A Plan
One thing we’ve realized since we’ve been doing our monthly budget is that there are some great side benefits to doing the budget, besides the improvement to our bottom line. Here are a few:
- We argue less about money: Since we have a budget, and we both know what our financial plan is, there is less opportunity to disagree and argue about money. We used to argue about each other’s personal spending money every month (her spending on clothes, my spending on electronic gadgets). Now we have a budget, and we both have a set sum we can spend every month without having to ask the other. That makes it easier to trust each other and not have to worry about spending on things we shouldn’t.
- We are more peaceful about our financial situation: It’s so much easier to feel peaceful about your financial situation if you have a plan, and you know how much money is coming in and going out. Before we felt like we were doing ok, but there were also times where we felt like we were sinking. Now we KNOW where we are, and it gives us peace.
- When bad things things happen, we don’t feel panic anymore: When life happens and an emergency comes up, we don’t have to feel panic anymore. We have an emergency fund, and are building up 3-6 months of expenses (as suggested by Dave Ramsey) and we know we can weather the storms that might come our way. Previously a large car repair bill or medical bill might have caused us to panic and feel like we weren’t in control. Now we have a plan for emergencies, and insurance to cover large expenses (like medical bills), and we are more confident in where we are.
- We’re eating healthier: Because we’ve cut down considerably on eating out at restaurants the last couple months, it also means that we’re eating healthier. Previously we would eat out 5-7 times a week, and not only was it a budget drain, but we weren’t eating very good. Because our budget cut out a lot of that eating out, we’re making out own meals now, and making healthier eating decisions.
- We’re able to help others: Because we’ve been taking financial classes, and because we’ve setup our own budget, we’ve been able to help others on their road to financial peace as well. People see us pulling out our envelopes to pay for things, and are naturally curious. This has allowed us to get them into doing their own budgets, and turning around their own financial situations.
- It’s easier to say no. We don’t buy as much junk: Before we would just buy stuff because we liked it, or because it was on sale (why not?). Now, because we have a budget, it’s easier to say no to purchases because “it doesn’t fit in the budget”. This means we’re saving a ton of money on “stuff” as well as meaning we don’t have as much clutter around the house. Double benefit – more money, less clutter!
So those are a few of the unintended but welcome benefits that we’ve found as a result coming up with a financial plan, and doing a budget.
Are you doing a budget?
Is your family on a budget? Why or why not? If you are on a budget, what unintended consequences did you find once you started working your plan?
Amber C says
I agree with all of your points. Neither of us are spenders but my husband is the extreme of not spending. When we budget new running shoes in he has no problem buying them. Before he would continuously put off buying them. So it has the opposite effect on his spending but it is good.
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I like your first point about arguing less – that was one of the unintended effects of us getting our money in order. Having peace in the house is priceless, so it is exciting that it is a little by-product of it…
We started FPU back in February. It is great. The budget is a must. Vacation was so much more enjoyable this year. It had been budgeted for and we didn’t have to stress over the trip.
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I used to do a budget and many of the items you mentioned above were the end result for my family as well. However, I stopped activetly budgeting a while back as I now have a general idea of what comes in and goes out based on cash flow (I have auto 401K and savings contribution setup), so as long as the net totals are consistent I am not too worried.
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Hendro Iskandar says
Good explanation. Glad to read this. Now i can start to make budget planning and try to save more money. Thank You.
These are all excellent reminders!
Prior to our budget, I didn’t truly trust my wife’s spending habits. Obviously, this was not healthy. However, now that we’ve been on a budget for over a year, we have developed mutual trust. No longer do I question her decisions to purchase Latte’s and no longer am I the “bad guy” who always says “no.”
As I posted on my blog earlier this month, we’ve also learned the true value of money as well as find ourselves thinking ahead more, evaluating the future effects of today’s expenses.
Thank you for very good explanation.
Sometimes is happens that our life is just for money. And that is wrong. We need to be wise when it is about money. Your post is very informative. I hope you don’t mind that I’ve used your opinion for my post Budgeting Your Money: Opinions From the Web . I hope to hear more from you on this topic!
Lori Mackey says
Love this! Controlling your money is empowering, and it stops controlling you :)
Dustin W. Stout says
My wife and I have been using Dave Ramsey’s zero based budget system for a while now. In fact, it’s helped us to pay off $15,000 in debt this month alone. I’ve actually taken Dave’s methods a step further and created what I call a “Harvest Budget”. It basically sets you one month ahead. Not really complicated, but it has done wonders for our family’s situation.
Solid Advice Peter! I found this article in my Google+ stream– I’m glad I did!
Peter Anderson says
Glad Ramsey’s program has helped you, paying off $15,000 in one month – no matter how you did it – is no small feat! The harvest budget sounds a lot like the budgeting paradigm espoused by the folks who wrote the “You Need A Budget 4” software that we use for our budget. Their whole idea is to get one month ahead so you’re never having to scramble to pay off your bills every month.