Five Things That No One Will Tell You About Budgeting

I’ve been through accounting and finance classes (including three at the graduate level), Dave Ramsey’s Financial Peace University, read countless internet articles about how to budget, and I’ve gotta say- every budget plan I’ve ever seen falls victim to the Diet Fallacy.

What’s the Diet Fallacy, you ask?  It’s the idea that if you just cut enough out, you’ll get the results you want.  If you cut enough calories, you’ll stop gaining weight.  If you cut out the couch surfing time, you’ll start losing weight.  If you cut out enough fat, you’ll get a rocking bod in time for swimsuit season.

As anyone who has ever been on a diet can tell you, that plan may work but the level of suffering that comes with it kind of destroys the happiness over any positive result.

The same is true for budgeting.  Sure, you can make it all work if you cut out enough spending, but if you’re sitting at home in the dark because you can’t allow for a higher electricity bill or gas for the car, are you really any better off?

So, in order to correct the prevailing Diet Fallacy in budgeting, I’m offering up The 5 Things That No One Will Tell You About Budgeting.

1. Chill out.  Seriously- relax.  Put down the calculator and step away from the spreadsheet.  Take a deep breath.  Look at this turtle.

Now that you’re smiling again, let’s continue.

Creating a budget is so much simpler than most people realize, especially if you have a steady income.  Draw a line down the middle of a piece of paper.  On one side, write down your monthly income.  On the other side, write down your financial priorities (these should be along the lines of food, house payment/rent, utilities, etc) until you’ve written down everything you spend money on from most important to least important.  Then, go down the line and give some money to each item.  Adjust monthly as needed. It may take some time to fine tune it all, but just remember to keep breathing.

2. Build in some wiggle room.  I have a section in my budget called “miscellaneous” and it gets $30 per month.  This goes to cover any part of my budget that goes, well, over budget.  Perhaps the cost of shampoo rises, the rabbit gets an ear infection, the mob comes and cuts the car’s brake line, etc.  The point is, costs are going to change each month.  The experts will tell you to have an emergency fund set up for these times, and that’s good advice; but having a place for the smaller emergencies already in the monthly budget will make you feel all warm and fuzzy for being prepared, and that’s a good feeling.

3. It’s OK to spend.  Repeat after me: it is ok to spend money.  Sometimes we get so caught up in watching the dollars and cents that we hold on too tightly to our money.  I catch myself doing this every single month.  I start worrying that the accounts won’t all balance out.  If I let it get too far, I’ll find myself rummaging through the tupperware cabinet, looking for a container big enough to freeze my debit card in a block of ice.  Don’t find yourself rummaging through the tupperware cabinet looking for a container big enough to freeze your debit card in a block of ice.  (Mostly because you’ll find tupperware from the 1980s and a surprising amount of dead bugs, but also because it’s counterproductive to the whole “chill out about the budget” concept.)  Put a line in your budget for entertainment each month, and spend every last cent of it.  Trust me- you’ll be a happier person.

4. Don’t punish yourself.  If you blow your budget one month, don’t start mentally berating yourself.  You’ve already spent the money, and chances are that you spent it on something you can’t return.  If it was a one-time thing (i.e. Best Buy had a 72” LED HDTV on sale for $100 for two hours, or ThinkGeek.com had a fire sale), accept the mistake and move on.  Enjoy your new TV and/or lightsaber.  If this was a repeat offense, take a look at your budget.  If you’re consistently overspending in one area, add more money to that area next month.  Take it from an area when you are under spending, or can make a cut.  Budgets can be flexible- don’t be afraid to make a change, and don’t feel bad for needing to do so.  Don’t end up looking like this:

At some point, I probably swore to never reveal this picture to the world. It’s cool though- my sister doesn’t read this blog.

5. Stop listening to the experts.  This is the best piece of advice I can give you.  For the love of buffalo nickels, stop reading everything you can find about how to budget.  Budgeting, like dieting, is a personal matter.  Read enough to learn how to make a spreadsheet, track receipts, and put debt collectors in their place, and then stop reading.  Sit down and do it yourself.  Don’t let yourself get stuck by the fear that you can’t do it, or that you’ll do it wrong.  If you are competent enough to recognize that you have money management issues, I guarantee that you are competent enough to make your own budget.  Plus, planning your budget yourself makes it a lot easier to stick to it.  Just saying.

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So that’s it for my advice.  Do with it what you will.  Keep in mind that I’m not an expert, so that last bit of advice totally doesn’t apply to reading this blog.  You may continue to do that, and laugh at my frantic tupperware related searches, all you want.

Next week will have my loan payoff updates, provided the loan company gets their website back up by then.  In any case, there’s a good story behind how I scraped together this month’s loan payment.  Oh, and you may have noticed this site is now located at losingmycents.com.  I finally bit the bullet and registered the domain name.  I had a coupon, you see.