The Skinny on Developing a Fat Wallet (How to Budget)


So why should we budget? In a nutshell, human beings are creatures of habit. If we perform something long enough, it becomes routine – and that includes bad spending.

Now, don’t get me wrong, habits aren’t a bad thing, really. In fact, one habit I’m particularly fond of is one that involves brushing my teeth. It’s even better when others adopt this same habit. But, hey, let’s save that for another time…

To get to the point, if we’re accustomed to cashing our paycheck every few weeks and buying whatever strikes us as enjoyable, the result of this becomes a bad habit.  We become needy and greedy and after awhile we find that we’re sitting in a dark room with no electricity surrounded by the latest infomercial miracle for burning our abs.

But how do we avoid letting it come to this? How do we develop good habits before the bad ones start?

Learning how to budget our money allows us to see the flow of our income. It gives insight into where our spending should be going and how much money we have leftover for the extras. It provides transparency into areas of excessive spending, as well as to determine where our needs are the most. In order to visually see and adhere to the budgeting process you must first keep in mind four general rules.

1. Learn where you are currently spending your money.
Putting this in writing is the most beneficial. So grab a notebook and pen, a spreadsheet, word processing document or a napkin and your less-than-favorite lipstick, if you must, and scribble out categories of how you’ve spent your money over the last month.

Identify utilities and rent, automobile costs, tuition fees, eating out, recreational activities, etc – as well as how much you are putting into a savings account and then see what this looks like on paper. It should be pretty apparent as to where most of your money is going.

Spreadsheets can help you categorize your spending so that you can set a threshold for each category. Another excellent option would be to utilize a budget-making tool such as Budget Ease.

Now that you have a foundation, take a breath.

2. Define the difference between a need and a want.
Some examples of a needed item could be:

  • Utilities such as electricity, water, trash removal, phone service
  • Mortgage payment or rent
  • Food
  • Auto loan
  • Tuition expenses
  • Clothing

Keep in mind that even these needs can turn into wants when we are consuming food beyond our income level or driving vehicles that far outweigh the paycheck we are bringing home.

This leads me into the next point of where a want might overshadow a need.
Examples of this could be:

  • Cable or Satellite TV
  • Expensive phone upgrades
  • Eating in restaurants
  • “Drive thru” beverages (coffees, sodas, etc…)
  • Designer jeans, shoes, purses or…[insert your item of choice here]

Once you have your list of wants, begin by removing these from your spending habits one or two at a time. Perhaps for the first month you’ll do something simple, like learning to make that great tasting coffee in your own home rather than dropping $5 a day on your local barista. After a few weeks, select another item to eliminate.

It won’t be long before you see the fruits of your labor.

3. Set goals for yourself so that you can see the progress you’re making.
As you begin to budget, you will feel the satisfaction of paying off debt, collecting a savings or just relaxing in the thought of not having to live paycheck to paycheck.  From this satisfaction comes a strong desire to continue trimming areas of excess.  While it might not look like it now, removing those wanted items becomes easier and easier until you feel sick to your stomach at the thought of how much you wasted on them before.

This is not an exaggeration.

Once you’ve achieved a goal you’ve set for yourself (let’s use the example that your first goal would be to save $200 into your savings), then you can reward yourself by having someone else make your coffee. Once. Again, the reward isn’t an acceptable avenue to develop those bad habits all over again. It’s meant to give you the motivation to keep going.

4. Finally, track your spending again and determine if you should shift money to other areas.
Don’t always assume that because you set aside $100 a week for groceries that this is where your spending needs to remain. Perhaps you’ve found that you over-budgeted in another area and you can afford to spend $140 a week on groceries.  (Yay! More Oreo money!)

Or perhaps you’d like to shift that extra money into a savings account so that when the tires of your car go bald, you can easily afford to keep up the maintenance and safety of your transportation. Again, this is an example. How you shift your money around will be up to you, but remember that budgeting is a process. It is constantly evolving and up for changes as you see fit. I should mention that a great way to set aside and easily manage the changes in your budgeting would be to adopt an envelope budget. This gives greater transparency into how much money you have left in each category throughout the month.

The possibilities are endless. Just know that the freedom you feel from living within a budget is infinitely more liberating than flying by the seat of your pants without one. It will enable you to curb your spending in such a way that items that truly seemed out of your reach before will be more accessible to you as you’ve been able to save for them in the correct manner. Suddenly things like splurging on a nice dinner out, a well-earned designer pair of jeans or a phone upgrade won’t be back breaking to your paycheck.

Or maybe you’d like to open a gym membership. You know, to work off those extra Oreos…


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