Episode #27 - Budget time
The power of Mint continued...see my household budget!
Intro:
For many on this list, I’m sure you’ve heard of budgeting or creating a budget. It’s elementary in the world of personal finance and paves the road to being able to invest. Why cover it in this episode? Well, it’s one of the powerful and relatively automated tools in the Mint app, and I want to share my budgeting failures so you can avoid making my mistakes.
Background:
I’ll quote the folks at MyMoneyCoach.ca to start:
Budgeting is simply balancing your expenses with your income. If they don't balance and you spend more than you make, you will have a problem. Many people don't realize that they spend more than they earn and slowly sink deeper into debt every year.
While this note will focus specifically on personal budgeting, if you work in any industry, you will (whether you know it or not) be connected to a budget. Corporations have budgets, governments have budgets, non-profits have budgets, and YOU SHOULD TOO.
Why budget? Well, it gives you a sense of how much money you should expect to spend over the day/week/month/year. You develop the budget based on what you will earn and based on what needs you expect to have over the course of the period you plan to use the budget. With this information you can pay down your debts, decide how much you can save, and most importantly better control your financial situation.
Budgets in action:
As you can see above, this is the budget for our household for the month of November. There is still more than a week left to the month, but you can see that some of the numbers are in the red from where they are supposed to be.- i.e. they are over budget.
Candidly, this budget has not been updated in a while. Spending habits have changed a fair amount since the pandemic, and figuring out how to adjust needs to be looped in to our habits. However, there are also some things that can be easily adjusted - for example the cost of internet is something that is thankfully pretty stable, but clearly never got updated to the correct amount.
Acknowledging the luxury I’ve got to be “over budget” in a few categories is something that I don’t take lightly, especially during these challenging financial times for many, but I want to also point out something that is missing here: a savings budget.
Ideally, I would set a goal for the amount of money I’d want to move from the traditional checking account and move it into a savings/checking account or even into some sort of retirement fund.
Takeaway:
As you can see, budgets can take up many parts of your life. Any experience, item, or utility that costs money can and should be budgeted. The more accurate you keep your budget the less likely you will have an overdraft when you make a credit card payment or when you use a debit card to pay for something you won’t go over on that either. Mint cleverly (and relatively accurately) knows where your money is being spent, but you should add things that didn’t get registered and update errors. If you use a lot of cash, then that spending is not tracked automagically, but you should put them in.
Remember, budgets should account for things in the experience and fun category!
Interact:
What budget categories do you see missing here?
Have you set a budget for 2021 yet?
If you load up Mint (it’s free) and then do a retrospective on 2020, or even just one or two months of 2020, you’ll likely get an image of what you might spend in 2021. This care and meticulousness will help you get more of these in order.
We will be updating my budgets this week, please do share in the comments if you do so and what categories you’d add!