The Art of Budgeting

What’s In A Budget?  Part 4

I hate to admit this, but I found out recently that I’m wired a little differently. I failed to realize that for most, budgeting isn’t easy.  If it were, everyone would do, few would have financial issues, and companies wouldn’t have errors in their financial reporting.  You see budgeting is a discipline.  I know that’s a word we love to hate, but I need you to hate to love this discipline.  As Pamela and I coach others through their financial woes, we’ve found that while it may not be easy it’s certainly necessary if you want the best for your life, your home, your business.

In our previous post, we introduced two of our main budgeting tools.  These tools are in our toolbox.  Think of an actual toolbox, there are many things in it.  In an actual toolbox, you have a wrench, screwdrivers, a hammer and other essential tools.  However, there are some tools you use more than others.  That’s what these two budgeting tools are to us.  They’re the tools we use more often than the rest and each tool has it place.

Mint – The Art of Budgeting
Mint is an application (app) that allows you to monitor your accounts all in one place.  It lets you see what’s happening in your bank accounts, with your credit cards, loans, investments and even your mortgage.  It’s an all in one place to see the overall picture of your finances.  The beauty of the app is that it doesn’t require a lot of work from you like most budgeting apps do.  You don’t have to enter the transactions and there’s not much you have to do to classify transactions.  It does that very nicely.  

I call Mint,  The Art of Budgeting.  Mint doesn’t budget for you, it’s just a tool like any other tool. You have to use it.  Any budgeting application will require your involvement and it must be on a regular basis.  I understand why that doesn’t sound exciting.  No one wants to see the bounced checks and shortfall in the account or the bills that hit after you just got paid.  It can be pretty depressing.  But what if none of those depressing situations happened to you?  You’d probably enjoy seeing your loans decrease, the value of your home increase, and the money you have left over surprise you.  That’s what we mean by the Art of Budgeting.

Mint takes your natural spending habits and categories them for you.   You don’t have any generic unmeaningful categories.  I need to move on… Pamela and I use Mint to view our real-time financials for our home, our business.  It also allows us to see trends over periods of time.  My favorite is to review the past year-over-the-year-before.  Mint’s perfect for this.  More on that process at a later date.  You need a tool that’s your go-to so that you can create art, something beautiful, with your finances.

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Excel – The Tool for Giving Every Dollar a Name
Microsoft did something when it created Excel decades ago and I’ve been using it ever since.  That would make me an Excel-ninja.   We use Excel for many reasons, but for this post, we use it to map out our spending.  You’ve heard me say this before in earlier posts, you need a map to get you from where you are to where you want to go.  Having a flight plan is important not just to get you to the destination, but to get you there as quickly as possible.  

In an Excel spreadsheet, we map out every dollar we get in our hands.  It has to go somewhere so that it doesn’t go anywhere.  For those skeptics who think it will not work, it won’t.  But for those who are interested in going beyond their present state, it will.  You need a plan to account for everything you presently do and what you desire to do.  A few summers back, we got hit with our homeowners association fees.  It comes every year at the same time, but for some reason we weren’t prepared to pay it.  That $250 hurts when it’s not planned for.  So we decided to add that as a line item to our budget.  It’s easier to put aside $20.84 a month than it is to come up with $250 all at once.  Give every dollar a name.  

Using Excel, we get to do two important tasks:

1. Take action on every dollar we make.
2. List categories that impact our everyday.

We use these tools (Mint and Excel) to know what’s going on and improve the financial position of our home, our lives, our business.

Today is Friday!
Your life is your business and no one else’s.  It’s up to you to make the best of it.  What tool are you using to monitor and evaluate your family’s finances?  What tool do you use to keep track of what’s coming at you?  I’d love to hear your thoughts.  Leave a comment below or click here to email me.