Happy first of the month!
The first of the month feels a bit like New Year’s Day to me, but 12 times a year. I’m not talking about the possible hangover or exhaustion from staying up who knows how late, but the feeling of starting a new year all fresh with a blank slate. Sometimes I’m lamenting the last year but looking with optimism to the future, and other years I’m giddy because it was an amazing year and I’m celebrating all that good and planning on keeping the goodness going.
Living with a budget makes the first of every month exactly like that – sometimes I’m lamenting the last month but looking with optimism to the next month, and other months I’m giddy because it was an amazing month and I’m celebrating all that good and planning on keeping the goodness going.
Either way, the first of the month is a clean financial slate. A literal blank page on which new goals can be set, new decisions can be made, and motivation is reset.
If you’ve been playing along at home you’ve had a few weeks to tackle some seemingly random tasks when probably all you wanted to do is get on track with your bills or figure out how to pay for summer vacation (or summer camp).
And now it’s the first of the month and your patience has paid off! Now – right now – let’s bring it together and march into March with a plan.
Three weeks ago you made a list of things that make you happy. Why? Because if you are working your face off to make money but aren’t happy and don’t know what makes you happy, a budget won’t help you in the long haul. Money really can’t buy happiness – but spending it towards the right things can take away a lot of unhappiness.
Two weeks ago you spent a week thinking about how you spend money. Why? Because at all income levels I’ve seen people not thinking about where their money goes and even more important why it goes there. Intentional spending is amazingly powerful. Spending by habit or routine is not.
Last week you made a list that I said would help you understand where you are financially right now. Why? Because you need to know where you are before directions to a new place can make any sense. I mean seriously, if you ask Siri how to get to a movie theater but don’t let her know where you are, she’s only going to be able to tell you WHERE a movie theater is. But if you’re in New York and she picks a movie theater in Spain that isn’t even showing the movie you wanted to see, that isn’t useful.
So what now? In the next month you are going to keep track of everything you spend. Don’t panic! It should take maybe an hour a week, and you can do anything for 30 days, even apparently a cabbage diet I thought I made up. I don’t really recommend the cabbage thing… but I do recommend tracking your spending.
Thinking about what you bought (two weeks ago) was your warm up for this. Because thinking about it is good, but when you have to log what you spend, you become even more aware of it. When you have to take that Target receipt and say $10 was clothing, $8 was groceries, and $7 was medicine, it becomes a little more than just $25 out of your pocket.
Here is your March template. You might notice it’s still not a budget. I noticed that too. I even made it that way on purpose. If I just had you make a budget, and then compare your spending to it for the next month, you would very, very likely fail at it. Because unless you are already tracking your money in detail, you don’t have the info on hand to make the educated guesses a budget requires. So any budget you are likely to make right now is a complete guess – or even worse, an idealized view of what you think you should be spending. I’m not going to let you get discouraged by comparing your reality to your best case expectations right off the bat.
If you were just dying to have an actual budget – you could dig though all your receipts and statements on everything and figure out everything you spent last month and try to split it all out based on what you remember (and yes, I do sometimes start with this when I work with people one on one) but it’s a lot easier and more accurate to just track things as they happen going forward.
The best part is that even without an actual budget you will spend a little differently (dare I say more wisely) just because you are self-observing.
Now, about the template. You’re going to customize it because this is about you. Really, all you.
- List all your actual money on hand (from last week’s list or start fresh if you skipped last week) in sections 1 (current) or 2 (long term). The first column is what you call each account, and I’ve filled in examples. The second column is the current balance. The third column is where you’ll put anything new coming in or out for the month – like a paycheck into your bank account. Section 1 is the accounts where your money flows day to day. Section 2 is things that are long term stuff you shouldn’t be touching much like an emergency fund, college savings or an IRA.
- Update the section 1 accounts to show the balance on the last day of the month. The section 2 accounts are fine with the balance you looked up last week.
- List most of the money you owe (again from last week’s list) in section 4. If you’ve already paid back Bob for the pizza, don’t list it but if there is anything new or something you realized you missed, go ahead and add it. (If you have a mortgage or car payments those are now in section 3).
- Now look at section 3. This is where you are going to track what you spend in March. I’ve filled in the most likely categories and left a few rows for you to customize to things you want to track specifically. There are some notes and sample comments in the last column if you want to see how I would do it. If you use the excel template you can make it do the math by typing things like “=5.25+26.42+3.19” except of course with your numbers instead of made up ones. Take extra care on receipts from those stores that sell all kinds of things (Target, Amazon, etc.) and split those out into the right categories.
Now let’s chat for another minute. Section 3 is pretty short. We all spend money on a huge range of things – but they don’t all need their own line. Even when we get to the actual budget I’m all about the k.i.s.s. method (keep it simple stupid). There is no reason what you do in a month can’t be tracked and explained on a single, regular sized sheet of paper, printed with a normal sized font.
In my budget, the one my family actually uses, I have the number of lines you see on the template. We have been using it for over three years with this exact number of (customized) categories using a single discretionary line for each member of the family, and one more for really random household stuff (lightbulbs, batteries, etc.).
My yoga, my work lunches, my hair care, clothes, nail polish, and anything else that is just spent on me for me goes into my line and ditto for hubby and kiddo. But wait – there is a line for dining out! Yes, there is. And it applies for when we dine out as a couple or a family not when I dine out on my own.
If you are a single budgeter (either because you have a one person household or because you maintain separate finances from others in your household) you can spread out a little more and put all your eating out expenses into dining. If you’re a fitness class junkie you can use a discretionary line to track just your fitness stuff. But the idea is still to keep it really simple. Only set up a line when you have a lot of things going into it every month. If it’s just your monthly gym membership, it doesn’t need a line – just note it in your discretionary and add a comment like “Gym (60)”
So that’s it. Off you go. I’ll keep sharing stuff a couple times a week, but your task for March is just to keep track of where your money comes from and where it goes. Have fun!