If you’re looking for the best way to build financial confidence, try setting up a written budget.
We’ve spent the last few weeks describing different spending plans or budget systems.
We’ve described several options for budgeting success and the amazing key to our budgeting success.
Today we’re sharing five benefits to having a written budget like we use. And yes, we do understand that a written budget may sound less tech-savvy than using phone apps or online budget systems. But honestly, most budgeting apps aren’t as usable as our system and the online (web-based) systems are very difficult to set up. Our written budget system is much simpler and easier to use. AND if the internet goes down our your phone falls in the toilet, your budget won’t go down the drain.
1) A Written Budget Brings Unity
You can’t underestimate the power of teamwork. Because we’ve managed our budget together since we were first married, we rarely have disagreements about money. We’re on the same page; committed to living within our means; avoiding debt with a smile and spending only when we have the money saved.
Being unified with your spouse over finances affects so many other areas of life. It will impact the type of cars you drive, the vacations you take and the schools your kids attend. But most importantly it will have a huge effect on your communication. Money won’t be a taboo subject. It will be something you’re both comfortable discussing, planning for and working with. Working as a team means you’ll both be pulling the same direction, you’ll reach your goals faster and have more opportunities to celebrate.
If your spouse is reluctant to work together on budgeting, try reading some personal finance / frugal living books together. If your spouse spends a lot of time driving, and they are willing, consider giving them audio books to listen to. That may get you moving the right direction. Or find a personal finance coach to lead you both to a better place and help you to get on the same page.
Being on the same page financially will change your dynamics with your kids too – when they see your united front, money issues will become a thing of the past.
2) A Balance that Brings Security
Because our written budget saves money in advance of anticipated expenses we always have a large balance in the bank and that gives us financial security. Maybe you wonder how that could happen if your income doesn’t change.
Here’s why it works.
Because you have one checking account divided on paper into multiple budget categories, and because in each of those categories you are setting aside ½ of each month’s anticipated expenses, money will accumulate. And in a short amount of time, your checkbook balance will reach new highs.
Here how it works:
Category Paycheck Deposit Budget Category Balance
(1/2 monthly amount)
Mortgage…………………….. $600…………………………………… $1300.00
Auto Gas/ Maint…………… $150………………………………………$425.00
Home Repair………………. $ 50……………………………………… $172.38
And if you continue with this analogy and added in your budget categories for Food, Giving, Medical Expenses, Medical Insurance, Auto Insurance / Registration, Vacation, Clothes, Recreation, Postage, Pets, Savings, Gifts and Kids Activities. Your total of all of your budget categories would be around $5000.
How would you like to have a balance of $5000?
The secret is managing what you’re going to spend rather than reviewing what you have spent.
3) Joyful Spending for Irregular Expenses
This system, not only focuses on saving for all of your recurring monthly expenses but also on annual expenses like Christmas and Vacations. Most monthly budget systems fall apart when planning for annual expenses. Our written budget allows you to save in advance for these important expenses.
If you do start setting aside a little bit of money each month for annual expenses like Christmas and vacations, you’ll see a growing balance each month and you’ll know exactly how much you have to spend. You’ll be amazed at how good you’ll feel as those balances start to accumulate.
Instead of asking, “Where do we want to go on vacation?” You’ll say something like; “By the time vacation rolls around we should have $800 in the vacation account. How far will that money take us?” And because you’ll look at every budget category this way you’ll become much more creative with your spending and more likely to stay within the limit you’ve set.
Planning for a Disneyland Vacation
Many years ago we wanted to go to Disneyland and San Diego for vacation. We didn’t have thousands to spend on this vacation, but we did have enough to take our family camping. We camped in the mountains outside of San Diego and drove to the sites we wanted to see. And at that time, Disneyland had a reasonably priced campground, and we stayed there too. We cooked most of our own food, bought a few meals at restaurants and had a fantastic vacation seeing what we wanted to see and only spending what we had saved!
Beyond vacations, there are other annual and irregular expenses that can take families by surprise, and create financial stress instead of joy. Some of these are the holidays, back-to-school, kids club activities, car repair, medical expenses and school pictures or high school senior expenses. These can all be prepared for in this budgeting system.
So many people who budget simply aren’t sure exactly how much they can spend on dining out, or clothes or car repair. They have an overall feel, but not a certainty. As a result, they might spend part of their house payment or grocery money if their car needs an expensive repair. Our budget system allows you to spend with Joy because you’ll know exactly what you have to spend!
4) Emergencies with Less Stress
Our written budgeting system also acts as an emergency fund.
A Budget Crisis Averted
In our first year of marriage, when we were just starting on our budgeting journey, Annette called Steve at work one day and asked, “Is it a problem when I step on the gas if water comes out of the tailpipe?” We had a blown head gasket. The engine repair, at that time, was $500. But we only had about $200 in our car repair account.
Should we have used a credit card or borrowed money from a friend? We could have, but because we were committed to living on what we had, we chose a seemly more difficult path.
We parked the car and Steve rode his bike to work. We moved money from some of our budget categories with excess money to our auto repair account. After a few weeks, we had the full amount and the car was repaired.
Emergency averted, car repaired and marital oneness were all the results of this one incident. For us, the choice to wait and pay cash for our auto emergency built our budgeting confidence.
Beyond car repairs, a budgeting system will give you confidence and help to de-stress other financial emergencies like medical expenses, home repairs, pet emergencies, and travel to visit sick or dying relatives.
5) A Written Budget Brings Assurance!
We know that none of us will travel life’s path without encountering some storms. Because we’ve committed to regularly managing and updating our budget we’ve been able to survive some pretty scary financial squalls: like the year our daughter had four surgeries; or when our car was totaled; or when Steve lost his job. Making it through those hard times gives us a deep assurance that we will survive the winds and gales that are yet to come. Because of our past, we can face the future with calm assurance.
Beyond the storms of life, you’ll also encounter some really cool rainbows – so many families have celebrated paying off student loans, credit card debt, cars, and even houses because they have faithfully used a budget. Those are things we celebrate.
A written budget reduces your stress and brings unity, security, joy, and confidence. Sure it’s a habit that requires some time, some learning and some discipline, but the benefits are so far reaching that once you’ve started and seen some financial success, you’ll never look back!
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