Create a Budget. Am I too organized?

Setting up a budget is actually something I enjoy.  I like the organization, I like working numbers and I like having a plan.  I am very good at coming up with the budget. Following it...not so much.  This past year my husband has really challenged me to come up with a budget and stick with it because he likes to save money. Before meeting me he enjoyed his minimalist style of life with a nice big savings account. Until he met me. Unfortunately, I don't have a minimalist outlook on life.  I like shopping, I like good food, I like trying new things and tend to prefer the more expensive version of all of the above.  He appreciates the fact that I have brought variety into his life and I make sure our family has everything they need but he has challenged me to fulfill these needs more frugally. I have been working on our budget for almost a year now and have finally come up with a system that works for us.  I can't say I have been able to stay within my set budgets 100% of the time but I have been making improvements and that is what is important.

I like to share what works because hopefully it will work for your family and make life a little more enjoyable.

1. Start a budget.  Whether it is on a piece of paper, a spreadsheet, an app, just get it started.  Start the mental process of being aware of how you are spending your money. This is a major step.  It can be the elaborate system I will introduce or it can be a basic tracking system.  However you start, you are going to end up adjusting it to what works for you and your family.  I had to adjust ours about four times last year because we had some major life events and I needed to be able to keep track of those expenses.

2. Let's get started on my version. About five years ago I created a spreadsheet to track my checking account.  For me, this is basically a way for me to keep track of the balance in my checking account by predicting upcoming bills and income (kind of like the ledger in your checkbook) I keep track of what comes in and goes out. On my spreadsheet I have a weekly running balance for our checking account along with all of the bills and expenses that come out of the checking account, with the date they need to come out.  My husband and I get paid every other week and we are paid on opposite weeks so I keep the balance updated weekly to reflect each paycheck.
Out of our checking account we pay things like credit card bills, mortgage, daycare and car payments. Everything else we try to pay with credit cards to get the rewards.  Things like gas, eating out, groceries, medical bills etc. we pay with credit cards. I check credit card balances weekly to make sure we are up to date on paying them so we don't accrue any interest or late payments.
Since this is basically a checks and balance system so you can set it up for monthly, weekly, or bi-weekly tracking.

3. A year ago I began using an application called Microsoft Money to create a detailed record of our spending habits.  This is where I got a little too detailed and over-organized. In this application I can take each dollar that is spent and categorize it. This system works very well for me because I need a running tab on expenses to be aware of how much can be spent on different items. In the beginning my mistake was that I tried to make too many categories for our expenses which made it hard to create and follow a realistic budget.  I recently re-organized my categories and combined several. Now, I am able to look at the budget snapshot along with the purchase history more efficiently, making changes and purchase decisions easier. Categories I track are groceries, clothing, entertainment, eating out, mortgage, medical bills, utilities etc.  I realize some of the categories will vary like utilities so I just make sure to set this one a little higher than our average.

Since food is a big focus of mine I like to check out the average budget for a family of 3 or 4. When my husband starts complaining about how much we spend on food I bring these up and show him that we are typically on the thrifty-er end of average spending.

http://www.usatoday.com/story/news/nation/2013/05/01/grocery-costs-for-family/2104165/
http://www.cnpp.usda.gov/Publications/FoodPlans/2012/CostofFoodJan2012.pdf

4. We have the categories, now what? With Microsoft Money I am able to set a dollar amount goal for each category and it tells me how much I should have left over at the end of the month in relation to our income. My goal is to have $1000 each month to put into savings so I start with the set expenses like mortgage, utilities, daycare etc. These are constant and don't have much negotiation.  Then I start filling in categories like groceries, eating out, lunches and clothing.  These areas are definitely negotiable and can be skimped if necessary to meet the $1000 each month into savings. Happy Husband.

5. Put time, focus and patience into your budget.  Let's face it, we wouldn't be talking about budgeting if we were independently wealthy, it is an important part of making our life enjoyable. After setting it up, keep up on tracking those expenses.  It might be pretty disastrous and hard to swallow in the beginning when you start to realize how much you are spending in some categories but that is the point.  When I started tracking our expenses my husband and I were spending about $150 per month on lunches...each.  Since then we have a set budget of $50 each per month. We arrived at $50 in baby steps. First I lowered it to $100 and then $75.
Keep every receipt until it is recorded in Microsoft Money to ensure the right amount of money is assigned to each category. This is particularly important at the grocery store or at bulk stores because you might be purchasing clothing, food and pet care items all at the same place.
Some stores will email the receipt...save paper and go for it. It's just as easy to add to your budget worksheet.

Making a budget is pretty easy, following it is the important thing. I have mine to the point where I can enter our expenses into Microsoft Money over my lunch break or after work before starting dinner. In the beginning it takes time but after initial set-up it is an easy system.

Embrace food, family and everything else that makes you happy