One of the things that I felt the least prepared to do as an adult and business owner was budget.
There are a lot of philosophies and strategies you can use to manage your money (including the Michael Scott method), but I think an alarming number of people use spend and pray. That is to say, they spend their money and pray that there’s some left at the end of the month.
Some people track every cent they spend, and I admit that before I had kids, I was close to being one of those people. But, I’ve had to streamline and simplify for my sanity.
I have consistently tracked my spending, either by tracking my spending online on my bank account or by maintaining and balancing my checkbook. What I didn’t like about just tracking my spending, was I didn’t have a place where I could check and see what I should be spending my money on and confirm that I wasn’t say… consistently forgetting to pay my internet bill. I want my spending to reflect my priorities for my life.
It turns out that I did have something like that for my business. I had a spreadsheet where I kept a record of all my expenses that I had every month and the days the payments were do.
Is there a rule against doing this with my personal finances??? No, actually, there’s not.
Thus came, part one of my budgeting strategy.The spreadsheet. I have maintained this for the better part of 2 years and it has brought me a lot of peace of mind.
Part one (today’s post) is where I track my spending every month.
First, I have my recurring monthly (and a couple of annual) expenses and the date during the month when they’re due.
Next, I keep track of how much these bills are. I have two columns I’ve labelled: Heart’s Desire and Good. Because…when things are going well, I’ll pay my debts downs more aggressively, I’ll contribute more to my retirement and savings accounts, etc. Sometimes things are just good (when they’re bad…I look like Michael Scott) and so I spend a little less. This gives me a range of what I need to do to make my finances work (especially since, as a small business owner, my income isn’t the same from month to month).
By the way, if you look at my spreadsheet, this isn’t my actual budget, I just put in some nice round numbers, but if you like the idea I’d be happy to email you a copy that you can use! Just leave me a comment!
I have it color coded –
Red things (like credit card payments) are necessary evils. I feel like credit card debt is the worst thing in the world. But, I also own a small business and my income can vary wildly from month to month, and there have been times where my credit card kept food on my table, so I try not to complain to much.
Green things are GOOD. Saving money for retirement and the future!
Blue things are things I’m paying for over time – like my car or my house. They are not bad in the way credit cards are, but they are not going to have the same future pay off as the green things.
Yellow Things are important. Like electricity, food, and water. But they’re yellow (like a yellow light) because I want to be cautious about these things. I definitely need electricity and car insurance and food, but you can spend a lot of money on these things and forget to spend money on the green things. I try to keep an eye on these things because this is where you can really cut your budget if things get tight.
You can track your spending and get some of the same information from an online service like mint.com, but I prefer to maintain this information myself because putting the numbers in myself helps me own the information, and appreciate the information for myself.
Do you think this is a good start? Do you have an innovated way to track your spending? Are you more of a spend and pray or track it all person?