For years I started budgets, kept track of my expenses and, after few weeks of torment, I finally gave in.
Wasting hours every month to stay on top of my budget just doesn’t seem right, there’s more lucrative stuff I could do in this time and earn more money than I can potentially save by budgeting every cent.
If I waste hundreds of dollars worth of hours just to save few tens of bucks, it’s really useless.
Focusing on earning more money makes more sense to me than following up to 30 budget categories.
The problem is that, once I stopped tracking my expenses, they again started spiraling and saving money got more difficult, if we didn’t keep our goals in mind anymore.
Here is how we should budget like a pro
Have a budgeting goal
Business planning, playing tennis and singing in the school choir, all have goals. You want to earn some money, maybe become at least a no.50 ATP player or win the state choir competitions.
Whatever the activity we are interested in, there are certain goals we have in mind.
Why would be budgeting more different?
We are considering moving abroad, so this gives us a specific goal: we need to save money, so that we can do this safely, provided we also have a 4 year old daughter to care for.
We are also renovating our country home, so there you have it .. another clear goal.
Our emergency fund should be bigger and we also have many taxes to consider on a monthly basis.
Just as with any goals, your budgeting goal should be specific: $2500 travel expenses, $15,000 emergency fund, $50,000 down payment for a house, $5,000 kids tennis lessons for the coming months.
Keeping 30 categories will make you sick
Of course, if you like spending time tracking your pennies down to subcategories, this is great. I love the idea as well, but, after 3 weeks of diligently tracking down each dollar, I start to get annoyed and give it up entirely.
The main problem with this is that we sometimes purchase a lot of stuff from a store, say Lidl in our case (similar to Aldi, for my American friends).
We purchase bread, milk, butter, daughter’s clothing, husband’s tools for renovation, dog’s food etc.
Now, if I have groceries, clothing, dog supplies, tools and so on in separate categories, it’s a hassle to break down the receipts and keep track of my money.
In order to keep my sanity I decided to make fewer categories: taxes, travels, savings, household expenses.
There are few categories I am very specific, though, they are related to my web design and blogging business and I need to carefully track down my expenses and income.
I keep separate budgeting categories for each of my personal finance blogs advertising earnings (Pftoday, Cosy-Life, The All Finance, Refinance Mortgage Search and DojoBlog), for my web design income, web hosting expenses etc.
This way I know which are my top performers and what works best.
Keep it realistic
I’d love to be able to save thousands of dollars each month, but I can’t.
Setting a very tight budget, trying to accomplish crazy goals doesn’t work, I fail and then feel so bad about it, that I just stop budgeting entirely.
It’s better to set a budget based on previous tracked performances and then slowly improve on it. Just as with running, you won’t run 50 kilometers from day one, so it’s useless to set yourself up for it.
Start slowly, run half a kilometer for instance and slowly grow from there. You’ll notice that, by allowing yourself to reach these smaller attainable goals, you are doing better after few weeks. And, who knows, you’ll win the next marathon.
Use automation, if possible
With budgeting software such as Personal Capital or Mint, you can easily track your income and expenses and then see how you are doing.
I have opted to use AceMoney for my online business, so this means I have to update the information myself.
While it’s a bit time consuming, it also gives me the chance to track down all my budget sub-categories and also get the reports that help me with my business.
Years ago my late grandmother used to budget with a pen and paper and it still worked wonderfully for her. Now, that we have all these computer based options and countless smartphone apps, it’s easier.
These are just few options to help you budget like a pro.
What else would you add? What’s your budgeting strategy?