Starting from Scratch

One of the hosts on one of the podcasts that I listened to once upon a time said that, before starting a budget, people should track their expenses for a month or two to see what they are spending. If I remember correctly, the host of that podcast repeated that piece of advice a few times over the course of several episodes. I don’t necessarily disagree with this advice, but I would personally prefer to be more productive with my time. I would rather create a budget first and then track expenses while utilizing the new budget.  This way, I am implementing the budget and likely being stricter with my spending habits at the same time as tracking my spending habits. Two birds! 

Don’t get me wrong, I understand why it might be appealing to track expenses and spending habits first. It would give me an idea of how much to allocate to each fund before I actually make the budget. In my opinion, it is more productive to create a budget based on financial goals and adjust spending habits accordingly. One of the purposes of having a budget is to assist in achieving financial goals by restricting unnecessary or frivolous spending. If I were to start with tracking my expenses and spending habits first, it would be mighty tempting to create a budget that supports those expenses and spending habits instead of one that supports financial goals.  

For example, if I were to track my expenses and see that I spend about $6 a day on Scooters coffee Monday through Friday (don’t judge), I might give myself an extra $120 a month for personal spending money than I would have if I just started the budget from scratch. That’s a lot of money to support a coffee habit! If I were to start the budget from scratch, I might only give myself $200 a month of personal spending money. Which is plenty to support a $120-a-month coffee habit, but only gives me $80 for other personal purchases, so I might reconsider the $6 cup of coffee (even though it’s soooo good).  

That’s not to say that I couldn’t adjust my budget as I track my expenses, though. I might have over-estimated or under-estimated the amount that I spend on certain expenses. Maybe I guestimated that I spend $500 a month on groceries, but actually only spend $350. Whoop! Now I have an extra $150 a month to save (hello new car) or spend (give me all the coffee). On the other hand, maybe I guestimated that I only spend $150 on gas a month, but the actual number is closer to $200. Now I have to make cuts somewhere else (preferably in the “Have Fun” funds) to pay for my gas (which is a “Survive Today” fund and should be prioritized higher than both the “Have Fun” and “Prepare for Tomorrow” funds).  

If I really wanted to get fancy, I could pull up bank and credit card statements from previous months and look at my spending habits. This way, I know about how much I spend and can build my budget accordingly. A few funds, like rent or mortgage payments, should be known without having to look it up. When creating a budget, I also want to take in to consideration what financial goals I have. Do I want to buy a new car or house soon? Retire early? Many times, in order to achieve these financial goals, I have to make cuts in the “Have Fun” funds in order to set aside savings in the “Prepare for Tomorrow” fund. But that’s another topic for another day.

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I have not taken into consideration anybody’s unique and specific situation. This post is based solely on how I personally do my budget and on my personal opinions regarding budgeting. If you would like one-on-one personal budgeting advice, please click the Budget Coaching button below or contact me to set up a free consultation call. Also, if you haven’t already, sign up for my monthly newsletter! I will be sending out exclusive content each month and you will get a free budget guide as a thank you for signing up!

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Published by Myranda Griebel

It is my goal to reach as many people as possible that need help, guidance, or advice with any aspect of budgeting so that they can work toward living the life they deserve and desire.

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