Bench Talk: Building A Budget | Part 1

Building a Budget Video Series

This is the first part in a series on building a budget and sticking to it. I believe that how we spend our money makes a statement about what’s important to us and without the help of a budget and without paying attention to how we’re spending our money, we might be making a statement we didn’t mean to make.

So, let’s build that budget. Every person, every family is unique. There isn’t a formula that you can use to prescribe how much should be spent in each category. So, the first step in building any good budget, is to figure out who you are now. If you don’t have a current way of tracking your expenses, now is the time to start. There’s a lot of options out there. There’s a lot of programs, there’s a lot of software. I like Quicken, I like Mint.com, but you need to find a system that works for you and that you will use consistently. I have friends that use an Excel sheet and that works just fine for them.

If you’re married, your first step is going to be picking the person in your marriage that’s going to be your primary record keeper. This is the person that has the time to do it and mostly enjoys doing this kind of work. You probably already know who that is. So, start tracking those expenses. Keep track of everything you spend. The easiest way to do this is to just download that from your bank or from your credit card statements, and the important piece here is to keep track of that cash. If you go to the ATM and you pull out $60, keep track of what you spent that $60 on and just because you’re not the record keeper, you’re not off the hook. You have to keep track of your cash as well and make sure that you collect all that data.

Just a word of caution, as you go through these first couple of months of tracking your expenses, you’re going to feel like you want to be more frugal. You’re going to want to feel like you’re giving a more responsible picture than maybe you did before. If you’re someone that likes to eat out or go to the movies, you may be tempted to not do that as much, so your budget initially looks better. I would caution you against doing that. You want to build a normal picture of who you are. If you suddenly decide you’re not going to eat out and you’re not going to go to the movies, your budget is going to be built on a picture of someone that isn’t you.

So, when you get to the end of your first month, start working on putting all of those expenses into categories. Your software will probably do that for you. You want to go through and make sure that your software is guessing the correct categories for who you are. For example, if I go to Target, Mint.com will put that in something called ‘shopping’. It loves the category called ‘shopping’. Well, that category is not particularly helpful for me. Chances are that that trip to Target was groceries or it was clothes or household items. So, go into the software and adjust those things.

Go through this process for the first couple of months. Keep track as closely as you can to everything that you spend and then after a couple of months or over, come back for part two in this series. We’ll take a look at how to look at those categories, make sure those categories are helpful and start building a budget to build your financial picture to be who you want to be.

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