The following is a post by MPFJ staff writer, Derek Sall. Derek is the owner of the blog, LifeAndMyFinances.com, where he teaches people how to get out of debt, save money, and become wealthy.
Budgeting was never taught to me when I was growing up. My parents basically functioned like this: my dad came home with his paycheck, he handed it to my mom, she gave him $20 for the week, and then she was the one stretching that paycheck to pay bills for the entire family. Never once did I see a written budget that they adhered to. They simply lived on as little as possible to get through each month with some money.
While this method seemed to work for them month after month, was it really the most effective way to handle the family finances? At this point in my life, I would say, “certainly not”. Many people try this form of handling their money – you know, the “put your head down, work so you can pay the bills, and survive into the next month – but it often leaves them fighting and with very little invested once they reach retirement age.
Why Budgeting Became My Friend
In my younger years, I married a carefree spender (which drove me nuts), and I used the budget as a way to control her spending. It wasn’t fun, it taught us nothing (other than that I was passionate about saving and she didn’t care one bit about it), and the experience actually left me a little bitter. Is this what it means to be responsible with my money? All these money fights and still not much forward progress financially? Budgets seemed like such a waste.
Today, however, I see budgets in a whole new light.
3 Ways Budgeting Became Fun
Budgeting has allowed me to pay off $21,000 of debt in just six months, and then $54,500 in less than 12 months, all while earning less than $75,000 a year. “How is this possible?” you might ask – “Budgeting,” I’d reply.
1) Budgeting showed me my average income and spending
I keep my budgeting pretty simple and use Mint.com to track both my income and my spending. With this simple tool, I can accurately find how much I typically earn each month, and I can also easily discover the main categories where I’ve been spending my money. This simple tool opened my eyes to how much I had (or didn’t have) at the end of each month. Often times, I only saw a couple hundred bucks after each 30 day segment, which meant I either had an income problem, a spending problem, or both.
2) It helped me reduce my bills drastically
In this Internet age, it is so hard to get a feel for where your money is actually going. Many times, money is automatically withdrawn from your account for various bills and you never really feel the hit. Through budgeting, I was finally able to see exactly where my money was going, and it was so much easier to take action on it.
My phone bill, car insurance, food, gas, my home insurance, my PMI, and my escrow – I was overpaying in all of these areas and could finally see it! By taking action immediately, I was able to reduce my expenses by nearly $200 a month in these areas. This never would have happened without seeing all of those monthly expenses in a budget.
3) Living on practically nothing made me happy
My friends all spend like the typical Americans. They go out to eat, they drive nice cars, and they often one-up each other with their purchases. Envy runs rampant among many of us, and in order to satisfy this intense wanting, we buy stuff – nice stuff, and often go into debt for it.
I started getting caught up in this a little bit just before I wrote my first budget. My friend was looking for a new ride, so naturally I had to find a nice car as well. In a short amount of time, I found my dream car – a black Nissan Altima. Man, that thing was gorgeous, and in the first week or two, I absolutely loved walking up to it and taking it for a cruise.
Then, a strange thing happened – it became a normal car.
The excitement of the purchase was gone and this car became my means of transportation and nothing more. A few months later, I sold it and bought a severely used Honda Civic and a bicycle (to save even more money on gas).
After riding my bike almost everywhere I had to go, I realized that my happiness level was soaring. I was spending practically no money, I was able to get places with my own God-given strength, and I was healthier than I had ever been!
I still feel the same way today. By coming to the realization that stuff doesn’t make me happy long-term, I really have no urge to buy much. As my friends purchase bigger and bigger toys (like expensive RVs for instance), I absolutely love my Honda Civic and my tent. It’s simple, cheap, and empowering, and I wouldn’t have it any other way.
How about you all? What about you? Has budgeting changed your life yet? In what ways has budgeting helped you?
Share your experiences by commenting below.
***Photo courtesy https://www.flickr.com/photos/jakerust/17135106706/
