Getting out of debt - easier said than done, right? When I’m faced with something that seems daunting, two parts of me often emerge: one part of me goes into stress mode and another part of me goes into full blown conquer mode. My conquer mode may sound like a good thing, and in some cases it is, but this mode usually leads me to a place of trying to do way too much at once and getting overwhelmed. The most ‘effective’ me kicks in when I take a more pragmatic approach. I slow myself down and start asking questions like 'what steps do I need to take to get control of this situation?'

Well, when it comes to gaining control of your financial situation one big step you can take is to BUDGET. Many think Budget = Bad. Maybe you've experienced budgeting being used as a punishment. Maybe you see budgets as very restrictive - a term that just doesn’t sound like much fun. I can understand why many people see or hear the word and automatically think negative thoughts. But, I’d like to challenge you to see the freedom and growth that budgets can offer - especially over time. Let’s examine what budgeting can do for you. I’ll also introduce you to a FREE tool that does an amazing job of helping folks reach their money goals.

For several years we approached budgeting the way lots of people do - we simply didn’t budget. We didn’t worry much about tracking our spending or being intentional savers. We basically thought that as long as we weren’t cutting it too close at the end of the month that we were fine. We knew enough to realize that spending more than what we made was bad. And we allowed the fact that we rarely did that to justify not doing a budget. There are a handful of things, financially speaking, that I really wish we would’ve done differently in our first few years of marriage - creating a budget (and living by it) is one of them.

You may be thinking ‘well, NOT living on a budget is not that big of a deal as long as you don’t misuse credit cards and never go in the red’. That’s basically what we thought too. What makes me kick myself, though, is that I see how we really started building up our savings accounts once we took control of our finances by budgeting. What if we had sat down together and created and lived on a budget starting much earlier in our marriage? Oh.My.Goodness. Each of our savings accounts would have double or triple the amount that sits in them currently. Please don’t misunderstand me - money doesn’t make my world go ‘round. But we have certain life goals (as do you) that we are working towards and having more control of our money will allow us to reach those goals - goals that include financial peace, owning a home (rather than a home owning us), helping others, vacationing, early retirement, and of course buying some things we’d like to have along the way.

When we changed the way we approached money, things started changing for us. Those things wouldn’t have changed without a plan and our monthly budgets were a big part of that plan. Let me go ahead and encourage you to check out www.EveryDollar.com. It is so easy to use and it is FREE! You can build your budget and track all of your expenses. No complicated spreadsheet needed. (The version that allows you to sync with your bank account called EveryDollar Plus is $99/yr but there is a free trial for those interested in checking it out.) We have used both versions now, but we started out using the free version and really like how easy it is to navigate and use! Watch a youtube video on it here: https://www.youtube.com/watch?v=GZzaGVvAJtg

The best budget is a zero-based budget, meaning your income minus your expenses should equal zero. This requires you to give EVERY DOLLAR of your income a place to go in your budget - whether it’s for a utility bill, paying on debt, funding a savings account, buying groceries, etc. Give every single dollar a name (as Dave Ramsey likes to say). As you budget, you will quickly realize whether or not your spending aligns with your overall money plan. If your plan is to pay off debt or save, you should be looking for categories in which you can cut back some to squeeze out extra money.

I like to work on our budget on my laptop, but my husband likes the app on his phone. The app is really handy because you can track your spending in real time. As soon as you spend, you can open the app and enter that info. By tracking your spending, for even just a month, you will probably notice some categories that you can start trimming back.

For us, it was our ‘eating out’ category. It’s just the two of us and while we do enjoy cooking at home, we also like to go out with friends and family. However, we were spending an insane amount of money eating out and didn’t even fully realize how much we were spending until we started tracking those transactions. So, we put a cap on how much we would allow ourselves to spend each month on eating out --- which sounds like no fun, BUT we had bigger priorities. We basically had to ask this question - what’s ultimately more important to us: eating out whenever we want or saving up so we can build a house? When we phrased it like that, the answer became very clear. Plus, it made us appreciate the times that we did get to eat out more, and it made us more careful deciding which restaurants we chose to spend our money at. And once you are out of debt, you can raise the cap on how much you allow yourself to spend eating out.

When you budget, you are spending with purpose and you created that plan before the month began. Too many times, we are reactive when it comes to our finances rather than proactive. We get to the end of the month and realize we are in a crunch and then react. Usually that reaction ends up involving a credit card…

You DON’T have to reach the end of the month and wonder where all of your money went. You told it exactly where to go before the month began, and your awareness will help you better reach your long-term goals!

If you are married, you and your spouse should sit down TOGETHER at the beginning of the month and do the budget. Start having more intentional conversations around money before problems arise. Once we started making our plan together, we realized that we both had to be on board and basically pinky promise to not break the budget. Yes there were some disagreements - trudge through them. Disagreements can actually result in more meaningful conversation about your goals, fears, and dreams. If you are single, find someone that can act as an accountability partner - someone you trust that you can discuss your finances with that will also help keep you on track. Make sure that person is aware of your long-term goals as well!

And just going to throw this out there: You shouldn’t be doing a budget ‘in your head’. Having a vague idea of how much you spend here or there is simply not going to cut it. It needs to be written down (or entered into your EveryDollar software/app). You need to be able to see it! Trust me (because we tried it that way) - doing a budget in your head is not nearly as effective as having it written down.

It will take a few months for you to feel like you are doing it right. You will have allotted too much money in one category, but not enough in another. Tweak it from month to month as you start figuring everything out. Give it about three months and you’ll see that you are figuring it out. By the way, each month’s budget will look a little different. I used to think a budget was just listing what bills we had - it has to be more specific and intentional than that. Exactly how much are you going to save this month? How much money do we really need to spend on groceries? Internet? Eating out? Giving? Recreation? Clothing? And so on.

One thing lots of people do to ensure they are being realistic about their spending plan is to make a category in your budget labeled fun money. We set aside a certain amount of fun money each month to spend on whatever we want. This keeps us from spending too much on unnecessary stuff but also allows some freedom. If it’s already in the budget as “fun” money, you won’t feel guilty spending it. Your budget should never be so tight that you feel like you never get to do anything but pay bills, make payments on debt, and save. While you should get really, really serious about all three of those, if your budget is too restricting the chances of you blowing your budget increase. Of course it depends on your income, how much debt you have, and your expenses as to how much you set aside for fun money - it might be $20 a month or $150 a month or more. I can’t speak to everyone’s situation, but as long as you’re reasonable and you keep your long-term goals in mind you should be fine!

Whether you consider yourself the “budgeting” type or not, I think you will quickly see the advantages of having a plan and feeling more in control of your money! Today would be an excellent day to sign up for EveryDollar and start working on your budget!! After all, there’s no time like the present!

Let me know if you have any questions or comments below!