Another week, another lesson. This week was a follow up on budgeting from last week where we set up an initial budget. The theme was sticking to it, which is the more difficult part of the process.
Table of Contents
Solving Problems
We started out with a really simple exercise on problem solving. A hypothetical story about a business was read, and we analyzed the problems and brainstormed several potential solutions. Then we flipped it on ourselves and individually pondered about a problem we were facing. Following the same process, we analyzed root cause and took some quiet moments to reflect on solutions. It made me realize how we often go through life and encounter problems, but don’t often take the time to carefully analyze and think through things. Often we choose sub optimal solutions due to lack of thought.
Budgeting Experiments
Truthfully, we haven’t ever been good at budgeting. We’ve tried the envelope method, and gone through many excel files. Luckily my wife and I have frugal tendencies and default to not spending unless it’s necessary. Once a month for a few years now, we plan out the next months spending and get everything filled out. We track probably 95% of our expenses, but it gets a little sloppy at times. We have to guess and borrow from categories. We rarely actually stay within our budget, but have still enjoyed success due to taking so much up front for investing.
That was one of my main takeaway’s; it might take a few years and trying several systems before you find something that actually works for you. The best budget is the one you keep, update and use regularly.
That said I still like the lazy budget, of scooping 40-50% of our money into investment accounts and not sweating the rest. I recognize that tracking spend by category is still a worthwhile activity, as it keeps us aware and engaged with our spending. That is one of the main reasons many struggle. People just swipe a card and hope it works out. There’s no forethought or visibility into daily finance, and it’s gotten to the point where people don’t want to check, because they know it’s bad. People are completely disconnected and disengaged from their financial lives.
My Wife Likes Structure
One of the biggest lessons I learned was that my wife needs more structure. We did an activity where we went through a series of questions to help us gauge what our financial priorities are. One question was regarding an emergency fund. I indicated that we had one, but my wife did not. The fact is that we have a decent stash of money to where we could cover a few months expenses should we need to, but it’s invested in the stock market. It’s not a designated emergency fund though, and my wife generally considers investments off limits. It is my observation that women feel safer knowing there is a cash cushion readily available. We need to set up a designated spot for our emergency fund.
Conclusion
There are many types of budgets available, from mint.com, to YNAB, Mvelopes to Excel. Take action and start tracking your income and expenses somewhere. Find something that works for you and your family. It might take a while, and some practice, but it will come. I have even found that Chase bank provides a pie chart categorizing all my expenses from my checking account. It can be something like that exported from your bank. I do tend to prefer Personal Capital though. They track all my accounts and transactions in one secure location and have a basic budgeting tool. It’s free, and if you want to give them a try, sign up to get $20 to Amazon.
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