Wednesday, January 5, 2011

You Need A Budget...Here's How {and a giveaway}



Each time we ask our readers what they're interested in, we invariably get an inquiry about budgeting. With a new year just getting started, we thought it was time to revisit the topic. A year ago we ran a YNAB giveaway and offered an additional entry to any of you who left a budget-related question in your comments; I read through them as I thought about what to post today...

There were a lot of questions about how to cut back. The best way to cut back is to make and live on a budget, but let's be clear about one thing - budgeting does not mean living like church mice. Budgeting simply means deciding beforehand how you will spend your money instead of wondering where it all went after the fact. But if you do want to cut back, budgeting increases awareness of spending, and careful record keeping allows you to see that you are, in fact, nickel and dime-ing your money away at Target. The best way to cut back and become wiser about your spending habits is to tie yourself very closely to the outflows - that is, record each one. YNAB (the budgeting software we use) recently introduced a budgeting app for the iPhone. I downloaded the app a few days ago and am already impressed at what a difference this new "closeness" with my purchases is making. I am spending more mindfully - allowing me to spend on the things I really value and cut back on everything else.

A few of you seemed overwhelmed at the very proposition of creating a budget.
I thought it might be helpful to tell you a bit about how we budget at our house - this will hopefully answer several of the questions left in comments a year ago. I'm not pretending to be an expert, but this system works for us.
Because my husband is self-employed, our income is variable. We start with a sum that we know will cover our monthly expenses. We then allocate those funds to the categories we have chosen, starting with the most important categories first. For us, these categories are:

*Tithing (10%)

*Charitable Giving

*Savings (this is long-term/retirement savings that we "don't touch." We save at least 10% to long term every month.)

*We have a reserve of 6 months of living expenses on hand. If we didn't have this, we would be putting a little away each month to build it in case of job loss, disability or other emergency.

*We also put aside money every month for car repairs/to save for a new vehicle, which we know we will eventually need. I recommend that you try to anticipate one-time expenses that are likely to arise and make sure that you start building savings for these kinds of things - car repairs, medical bills (at least enough to cover the deductible on your plan), Christmas, etc.


Here's a screenshot of the YNAB budget interface, in case you're curious. (p.s. this is not our financial information)

We then allocate the remaining funds between the rest of our categories, also arranged in order of importance. When we first started budgeting and money was really tight, we had our categories broken down very specifically. Now we care more about the cash flow in and out than the little details, and our categories have become more broad. If you're just starting out, I think it's good to be specific; you want acute awareness.

We budget for gas, insurance (health, car, and life), utilities, kids (clothes, incidentals, etc.), miscellaneous, date night, fun funds (my husband and I each get a certain amount of money every month that we don't have to be accountable for in the budget - fun money. This has saved our budget. And maybe our marriage. However, in months when money is really tight, we don't fund these (and sometimes others of the discretionary categories as well). It's sad.)

If we have money leftover after our necessary categories are funded, we talk about what we want to do with it. Often we'll think of a mid-term goal we want to achieve (take a vacation, buy a new appliance or piece of furniture) and we'll stick the excess in a "save to spend" category and let the excess accrue until we're ready to make a purchase.

At the end of each month we reconcile our actual spending with our projected budget. YNAB makes the process slick and swift.

I know this is a lot. I'm sorry if it was overwhelming or confusing. Please feel free to ask questions in the comment thread. I want to say two things before I wrap it all up: some things get easier as you make more money, but a lot of things don't. Don't wait to reach some arbitrary income horizon before you start saving, or giving. Do it now. Even if it's just a tiny bit. If you can't be generous with a little, you (probably) won't be generous with a lot. If you can't live beneath your means with a little, you (probably) won't live beneath your means when they are more substantial. And finally, don't be discouraged by the distance between where you're at and where you'd like to be. Just start. Make small changes. Do what you can. Progress will come. And so will peace.

xo,
Em

*** !Giveaway! ***
We do all of our budgeting with YNAB. We love it. (You already know as much - and if not, you can read about it here). Today we're giving you the opportunity to win a copy of the latest version of the software.

Leave a comment to enter. Additional entries given for tweeting/facebooking/blogging about this giveaway. Please leave an additional comment for each additional entry. And please make sure we can contact you through your comments - we don't like hunting down winners!

88 comments:

{Katie} said...

Those are some great suggestions! Thanks! (katieburke44@gmail.com)

Megan said...

The hubby and I would LOVE a copy of the budget software! We're newly married and trying to get things in order. Thanks so much!

sarahandmatt said...

I would love to have this software! Very good tips as well. Thanks!

Jeff Ann Ehre & Benjamin said...

....budget... ?What...oh yeah the term I always dread...but I am working on. This would be awesome, does it account for a stressed out grad student family? Thanks! anonymaas.family@Gmail.com

Alicia said...

This would be awesome.

aliciarowberry(at)gmail(dot)com

Ann said...

This it perfect. Just the other night I was trying to convince my husband that we should try out YNAB. If we could WIN it for free, I'm pretty sure that would convince him.

Pick me!

Lindsay said...

Was hoping you'd do another YNAB giveaway! Here's hoping I win this time around.

Lessa said...

I would LOVE to win this! We're not good budgeters but need to get better and I think this is just the thing to help us!

Anonymous said...

After one year of full time employment after college, I still find myself living like a college student! Where does my money go? Ynab would certainly help
Me out with that!

Colleenfrazier(at)gmail(dot)com

Camille said...

This would be a GREAT tool for seeing where we spend our money! Thanks for the giveaway!

camillelewis47(at)gmail(dot)com

Anne said...

My husband and I could use this!

Lindsay said...

Something like this would be way better than the messy excel sheet I'm currently using. :)

Jonesy said...

I appreciate you talking about self-employment. I find myself envying those with a regular fixed income because budgeting is SO MUCH EASIER that way! Last year, we set a financial goal of not using any credit and I'm happy to report we met that goal! This year, it's figuring out how to make and keep to a variable-income budget, and this would be a New Year's miracle to win! (Though I'm almost certain we'll purchase it if not...) Thanks for the great (and meaningful) giveaway!

Mickie and Matt said...

Oh please pick me! With my hubby graduating soon and our next addition coming before hand we are trying hard to get everything in order... it's working so well HAHA YNAB just might be the trick! Thanks for your awesome blog ladies :)

Megan said...

I've tried several times(half heartedly probably) to get us on a budget. We've always just been blessed to have the money when we need it. This last year i actually had to use credit a few times in order to get us through and I hate it. My goal is to finally get us on a budget and living in a way that can work as our lives change in the coming years. whether that is with a homemade budget sheet or ynab, i want to get it done. So giveaway or no, thank you for the comments you made about being specific as you start out your budget to know exactly where all that money is going.

The WoodLand School said...

Oh my goodness! I would *love* to win a copy of this software!

Carolina said...

My husband and I have talked about purchasing this software but have been putting it off and We need it really bad!!!!

Chris said...

This might just be the kick in the rump we need. Thanks for the chance to win a copy!

Kalli Ko said...

Count me in, how is it that I still don't follow a set budget!

Anonymous said...

I would love to use this program! My hubby and I are setting up our budget for the year and this would be a great thing to use. Thanks for the article. Always good to get extra inspiration.

callkms@msn.com

Extraordinary Housewife said...

We would for sure use the software. With number 7 arriving any day we can't ever seem to save enough money. Thanks.
Lana
red pen 2010 @ hotmail.com

jessica said...

One thing I need to add to my budget is food storage and emergency preparedness. That's something I'm really behind on!

Jolena said...

great breakdown of budgeting basics. I'll be bookmarking this post!

Andrea Gunnell said...

I would love to try out this software. We are on a very tight budget right now as my husband is in PA school so it would be nice to have a good program to do it all.

Melissa McAllister said...

I checked out YNAB after your last post about it and it looks really good. I was just trying to convince my husband that we should try it. I'd love to win a copy of the software! (melissa [AT' melissamcallister [DOT] com)

Joan said...

We budget but not as acutely as I'd like. I think YNAB is the perfect solution to that problem!
joankoplin@gmail.com

Duckie said...

Thanks for the helpful suggestions! I want to budget so badly but I just get overwhelmed and frustrated.

Thanks again!!

agraehl@gmail.com

Duckie said...

And I just let all my friends on facebook know about it too!

Thanks again!

agraehl@gmail.com

Natalie said...

I love this! Thanks for the inspiration. :) (leavitt.natalie@gmail.com)

Rebecca Averill said...

This looks great! It would be so helpful. Thanks!

Megh said...

I love budgeting! Thanks for being an example, and sharing your success story!

*LC said...

A budget makes me feels more responsible and in control with our money, but keeping track of expenses has kept us from sticking with it. I love numbers, so I would actually enjoy using this software! Thanks for posting about this :)

Jessica said...

I'd be really interested to try YNAB and see how it works. The program I use now is only online and you have to pay per month or per year, so when that subscription expires I'd like to try YNAB. Does it automatically download your transactions? Thanks for the great suggestions! (jessica(dot)malan at gmail)

Avalon said...

OH pick me! We have a goal to save up for a down payment for a house and I need all the help that I can get in pinching the pennies! Thanks. (avalon.marsh (@) gmail.com

Jessica said...

I would love to win. I struggle with sticking to my budget. Maybe this would really help! Love your site too! It's fabulous! jessandbill@gmail.com

Honey said...

Our family of 8 could totally use this! Thanks, Bloom!

Gibb Family said...

I would Love to win this!!

Savannah said...

Wow! This would be so great for my family!!! I hope I win it!
foxsavannah@yahoo.com

Jennifer said...

Yes, I need a budget! Thank you, thank you for the chance to win this software... I have been looking at it and would love to give it a try! (otjenh@gmail.com)

Sue said...

This has definitely been the topic of the month, heck, for the past few months as I am self employed now, after having lost my job last June.
This would help so much with getting us back on track!
Thank you for such a 'thoughtful' giveaway!

Sue

elementsofhomecleaning@gmail.com

Katie R said...

we need to get much better at this. thanks for sharing.

Vicky said...

A better budget it something we definitely need.

james and bess said...

this would be a great jump-start to our budgeting goals!! great giveaway! :)

bess

Abbie said...

As much as I don't want to need this (because HELLO no money will be made for a long long time), it's probably a good ides to figure out how we're going to dig ourselves out from under our crushing debt.

(I say all this with the happiest of hearts:)

Kilee said...

Great way to start off the year!

Dano said...

Great ideas! I want to win!

Andrea said...

Great tips. Thank you!

I would love to try out this software!

AJ said...

I totally need this. I desperately need a budget, but have a hard time setting it all up myself. This would be perfect!
ajpackard(at)gmail(dot)com

Mandy said...

Thanks for the encouragement!

Jamie said...

Building a budget is high on my to do list.

Jill said...

I think this would be great to try. My husband and I manage our money well and always stay within our means, but we've never set up a specific budget per se. We pay tithing and then 10% goes to savings. The rest goes to our bills and then anything left is kind of spent willy nilly. We could be doing better with that and I think this is where this softward couldn't whip us into shape!!

duck said...

I love these budgeting posts! I really needed this :)

Julie Nelson said...

Does YNAB allow you to pay your bills & print checks from it, or is it used as strictly a budget tracker to be used in conjunction with another financial software i.e. quicken?

Kimberly said...

Budgeting is so discouraging at first-you look at where you're money went and you're just horrified, and then slowly you begin to control your money instead of it controlling you.

I do ours by hand, but having software would make it so much faster, easier, and would probably help my husband want to be a part of it more-he's such a computer geek.

Unfailing Love said...

I loved your budgeting series last year. Wow-it's hard to believe it was already a year ago. Your final comments in today's post are truly the most meaningful. For my hubs and I, we had to learn these lessons the hard way. However, the Lord has always provided for us even when I thought we wouldn't make it. I now see the immense value of precise budgeting; however, I am still not the best budgeter. YNAB would be such a welcomed addition!

Megan said...

Reluctant budgeter? That's me. Thanks for the tips and the motivation!

jeanine said...

Thanks for the motivation! I'm making a goal to be better at keeping my budget this year!

jeaninecraneATyahooDOTcom

Emily said...

Great practical tips. We don't have consumer debt but I really want to get into a house this year and YNAB might help us more accurately plan and track spending. Thanks!

Deanna said...

I really need to budget. This would definitely make it easier. sprklyblue at gmail.com

Amber said...

I'd love to give this software a try. We officially started a budget in September and this would be a great tool.

Shasta said...

Great information here! Figuring out where our money goes is one of my resolutions. So far, for one week, I've tracked everything. The software would really help!
thelovelynest at gmail dot com

Kristyn said...

I really hope I win!

And anything else about how to really STICK to the budget like some things you mentioned here is awesome! Like how often are you checking your amounts, and at what point do you decide to not go to the grocery store b/c you've just run out of money?) My husband and I have set up so many spreadhsheets and set so many goals, but yet somehow still get overewhelmed and have not once stuck to a budget for a month! Isn't that crazy? Thanks so much for the tips! This is one of my year's goals, but I have no idea how to accomplish it!

angellacowan said...

We would benefit so greatly from this software! angellacowan@gmail.com

Eileen said...

YNAB sounds great. I'd love to have it.

Sarah said...

This sounds like a fantastic tool. Getting our finances in order is definitely one of my New Years resolutions!

cindy baldwin said...

I've always been interested in this particular software...

Carrie said...

Would love to win!

tylerandcarriemiller at yahoo dot com

Jen said...

Budget? We would love to try it out. Thanks for sharing your insight!!!

hiettfam at gmail dot com

Dallas and Natalie Turley said...

I would love to use YNAB!
I have let my husband be in charge of the finances while I finished my very busy degree. Love him for his effort but I need some help getting it back in order(along with paying back student loans) after 3 years!

Nada said...

I would love this!! My husband and I have been working on creating a budget right now for the first time

N_shewman@hotmail.com

Barb @ getupandplay said...

I really DO need a budget!

Kierra said...

Oh, I need, need, NEED THIS!!! I downloaded the trial and fell in love but on our income, there just isn't the wiggle room yet to buy. Fingers crossed!

Kierra said...

I tweeted!

http://twitter.com/PumpkinToMyself

Kierra said...

facebooked it!
http://www.facebook.com/profile.php?id=693008311

Julie said...

The possiblities of the new year are very motivating. Maybe this is the year we start budgeting!!

Anonymous said...

Count me in!

The Shumway Family said...

I'd LOVE it!

sbcmom said...

I started working out a budget right after Christmas and my niece just asked me to help her do the same last night. YNAB would be a wonderful help. Thanks for the giveaway!

Tyler said...

We'd love to win it!

Becca said...

I'm a crazy budgeter and have all sorts of excel spreadsheets for it! I'd love this!
bataylor8 @ gmail

Shara said...

This software looks great! My husband and I are naturally savers, but we've never had a real budget. We're saving for our first house, and this would be a huge help!

skcompton (at) gmail d0t c0m

Leslie said...

am i too late? this would be so awesome, we need help! :)

Mindy said...

I totally need this .... and thanks for the awesome tips and suggestions! It's a news years resolution for us for sure :)

thebusbyfamily said...

we have never truly budgeted in our ten years of marriage. we have budgeted little bits here & there and we do have different savings accounts, but the everyday purchases are random for sure.

I'd LOVE to change this.

melissa.busby@cox.net

Stueller said...

Wow.. I have never seen this software before. Cool!

believe5621@yahoo.com

Jschmalle said...

Pretty please, pass one my way!! We are in some real need for a program like that.

Anne said...

I can't tell if this giveaway has ended, so here goes! Thanks for the budgeting tips! schofieldfamily@gmail.com

Leslie Lisowski said...

Trying to get 2 children through college at the same time, it doesn't matter how much money we make we never have enough. YNAB is exactly what we need to help us give our chiildren an education without living in the poor house. Thank you for your encouragement!!

gvb29@comcast.net