Five tips for managing money headaches
With every new year comes new hopes, dreams, and plans. It’s a fresh start that invites us to examine our habits and think about what could grow, shrink, or change. When it comes to practical resolutions, organizing finances could be a worthwhile goal for many of us.
A range of specific tasks fall under this umbrella category, from getting out of debt to saving up for a family trip to simply developing a system that brings peace of mind. As a homemaker, financial responsibility carries more weight for me than ever before, since it’s not about my money but our money — that is, mine and my husband’s, which exists to provide for our family.
Ever since getting married and assuming responsibility for a family household, I’ve had to learn some basics about money management to keep day-to-day spending and saving reasonable. I’m certainly no financial expert, and there isn’t a one-size-fits-all approach. For this reason, at the end of this post I’ve included references to several budgeting tools that offer more guidance, but I’d like to share some practical lessons I’ve learned so far (often through mistakes!) that have helped cure my money-induced headaches.
Why budget?
The term “budgeting” has the connotation of financial insecurity — something we do only when money is tight. However, (as I’ve learned from my personal favorite budgeting guide, You Need a Budget by Jesse Mecham) budgeting really means having a plan, and that’s something that anyone can get behind.
Maybe that plan does involve pinching pennies to get through a rough patch, or maybe it means deciding how to spend or save excess funds. Either way, organizing a personalized household budget brings order, peace of mind, and (believe it or not) a spirit of generosity to everyone involved. Why? A plan reminds me that cash in the checking account isn’t sitting there for me to spend on whim because it has a specific job. With a budget, I have a concrete game plan for how to make that money not just for myself but for the flourishing of my family and others.
Once I start viewing money as not my own — a gift entrusted to me — I can see it more as something that I and my husband have both the freedom as well as the responsibility to manage. The choice of how to spend or save our money lies entirely with us, but each decision has consequences to consider.
With all that motivation behind us, here are a few practical points:
1. Divide essentials from extras.
One simple way to get started with budgeting is to look at last month’s spending history and categorize each purchase. Use these categories to make a plan going forward. How much cash to allot for each category? Before we jump to the conclusion, “Well, I’ve always spent $200 on clothes per month, so I’ll continue to do that,” it’s important to think about the actual priorities in our financial plan. I like Mecham’s philosophy that we really can decide to use our money however we want — once the absolute essentials are taken care of.
These essentials are the expenses that we will always be charged for, like it or not. Think bills (rent/mortgage, utilities) and necessities (food, gas/public transit). Some essentials might allow for adjustments (i.e., I can adjust how much I spend on groceries, but I can’t easily change my mortgage payment), but they are all categories that I’ll spend something on each month, so they deserve top billing in my budgeting plan. If I don’t allot money there first, I won’t have financial security for long!
The great news is that once those essential categories are identified, any extra cash can be allotted however we like. It’s helpful to ask ourselves, “After the essentials, what are my priorities?” Is it household projects? Piano lessons? Date nights? Whatever those categories are, factor them into the plan.
2. Keep inflow above outflow (in general).
Full disclosure: I learned this one the hard way! One day, my husband came up to me and very kindly, very gently told me that it looked like we were spending more money that we were bringing in each month. It was definitely a humbling moment for me, but it also became a memorable lesson.
This lesson helps me keep the sum total of our monthly expenses in check. Think about the regular inflow of cash each month — salary payments, steady side-hustle money, etc. Whatever that sum total is, try to keep the monthly outflow below that number. For example, if I can expect $4,000 to come into our bank account each month, I should try to keep the monthly expenses lower than that — say, no more than $3,500. That way, I can rest assured that we’re not losing money from month to month, not living paycheck-to-paycheck, and are even able to set aside extra money for future use.
Know and assign your strengths
Being a homemaker involves overseeing a lot of cash inflow and outflow (grocery shopping, reviewing bills, cashing checks, etc.). But if there’s an area of money management that doesn’t come naturally or would be better handled by someone else (spouse, friend, hired consultant), that’s fine! With every home management skill, it’s important to know our abilities and limits and work with others to build a stable system. In my own household, I manage the day-to-day budgeting and spending, while my husband focuses on long-term financial goals, larger expenses, and insurance.
Now, I say in general and try because the truth is that some months involve out-of-the ordinary expenses that put outflow above inflow. Whether it’s Christmas shopping, a home improvement project, or medical expenses for a new baby, don’t let the occasional blowout month or two rob your peace of mind! What matters is our household’s usual habits.
To get a sense of spending trends, I’ve found it helpful to look at the inflow/outflow ratio of several months together. If there is a consistent pattern of spending more than what we’re bringing in, I might need to reevaluate our spending priorities and make some more substantial adjustments to the budget. If it’s just been a month of unusually high spending, I can simply focus on pulling back in a few categories for the next month to get back on track.
3. Review regularly.
It’s tempting to set up a budget and then ignore it for the rest of the month. But that approach usually makes it harder to stick to the plan, which leads to disappointment, which makes us want to give up the effort altogether. A solution to this downward spiral is simply to check in with the plan more often. I now have a scheduled time once a week when I review the budget and see how on-track we’ve been. I balance the accounts (many systems make this simple and straightforward), categorize recent purchases, and examine whether we’re coming close to our limit on any of those categories. Having a regular check-in makes it easy to catch issues early so that they don’t balloon into catastrophes. It also makes the budgeting business much less daunting, since it breaks the month up into bite-sized chunks.
4. Communicate.
Odds are that your household budget involves more spenders than just yourself, so it’s important to be in sync about your plan. This doesn’t mean that every time we pull up the budget, everyone else must be involved, but it does mean that we should be touching base with each other regularly.
This touch-base need not be a stiff meeting — make it a fun outing or a date! Attaching some enjoyable activity to the conversation will motivate us to stick to it.
Whether it’s once a week, once a month, or even once every other month, having a scheduled time to talk about your financial plan keeps everyone on the same page. It also opens up conversations about new ideas and goals. Maybe one of you has discovered a new charity, or the other would like to save up for a new car. Making time for money talk can help bring those ideas to life.
One practical aspect of this is to decide together what kinds of expenses need to be “vetted.” For example, my husband and I decided before we got married that if either of us were thinking of buying something out of the ordinary that was worth more than $50, we would check with the other first. This prevents the annoying conversation that springs from opening the bank account and finding a mysterious large purchase!
5. Have a sporting spirit.
The truth is that no matter how much we plan, life is messy, plans change, and we all make mistakes. We get two flat tires. We miss a bill. We buy way more chicken that we thought we needed. These mishaps can sometimes leave the month looking much less tidy that we hoped it would be. But the solution is not to give up and throw out the plan altogether! That won’t solve anything. Instead, I’ve always found it helpful to 1) talk through the problem, 2) view the experience as a valuable lesson, and 3) most importantly, laugh at myself! Money is an important tool in life, but it is only a means to an end. The minute I start thinking that my budget must be perfect in order to have a peaceful home, I give way to stress and discouragement. They key is to do our best, adjust as needed, and appreciate our means as a gift that empowers us to do many good things. With that mindset, a budget quickly becomes a friend instead of a menace!
More Resources:
You Need a Budget: This is what I use. Learning the approach and system has been a tremendous help for feeling more confident and in control about every cent in our bank account. The beauty is that the system helps you assign a job to every dollar you own, whether that’s for spending or setting aside. It’s also very easy to move money between categories to account for unexpected, real-life changes that each month brings. The biggest drawback is that it doesn’t give you a ready picture of monthly inflow, so you have to make sure on your own that the monthly expenses do not exceed the monthly income.
Mint: A simple, free system that makes planning and categorizing expenses easy. It’s run by Intuit, which also runs TurboTax, so if you use both systems, they can sync to help you file taxes more easily. This system has you enter your expected income per month, which can be helpful to make sure you’re not overspending. However, it doesn’t make sure that you’re planning with all the money you currently have, which could lead to poor spending habits or cause problems if your income suddenly changes.
Quicken: Another helpful system that makes categorizing purchases and balancing bank accounts easy. This is the software that my parents use, and they love it!
Financial Peace University: For those interested in taking a course on money management, this might be a helpful opportunity. I haven’t taken FPU myself, but I’ve heard from several couples that it offers many helpful insights about how to have a healthy attitude toward money and is especially helpful for those trying to get out of significant debt.
2 thoughts on “Budgeting Basics”
Just found your blog through Theology of Home and I really enjoy it! So many useful tips and written in such a kind, helpful way. Thank you!
Thanks so much, Kristin! Glad you enjoy it!