Having a budget is a great thing. Living according to your budget can be hard. Often they spring leaks. Sometimes money seems to disappear and you’re not sure where it went. Do you have a leaky budget?
I have a queen-sized air mattress that my large male cat found to be tasty. He chewed on it for a while leaving several holes in the corner. Patching them has become an ordeal and what seems to be an exercise in futility. But with diligence, perseverance, and a little ingenuity, I have patched all of the leaks.
Budgets too can spring leaks. Spending a little extra in your food budget or while on vacation can often lead to spending more than you earn by the end of the month or year if you are not mindful to balance your spending between all of your budget categories.
Unlike the air mattress that can’t make air, credit makes it easy to “borrow air” to meet your current spending desires. But think about it, your spending should never exceed your income. Like the air mattress, there is only so much air.
This is a very important principle and practice when living on a budget. You have to monitor your spending for each of your budget categories and when you need to or choose to exceed what you have budgeted for a category, you must take money away from another category to compensate or balance your budget.
One of the simplest – and maybe best – way to accomplish this is the envelop system. The concept is you divide your income each pay period into envelopes labeled according to your budget categories. Then as you spend the money on say Food, you take the money out of the envelope marked Food to pay the grocer. If when you are checking out and hear the cashier state you owe $157.39 and you only have $150 in your food envelope, you have two choices: either take a few items out of your grocery cart and have the cashier deduct them until you get below $150; or you take money from another envelope.
Yes, it that simple in practice but very hard when you have grown accustomed to simply charging your grocery bill to a credit card. With the credit card, these kinds of hard choices don’t have to be made, especially in front of the grocery cashier!
People on a tight budget will therefore add things up as they shop in the store. I did this when I had to put myself on a very tight budget. I carried the calculator and found it a challenge to see how accurately I was able to get my total to match what the cashier said I owed. What I discovered was I have no idea what was taxable and what wasn’t and so I was always off by the amount of sales tax that was imposed. Clearly a trap you can easily slip into when you need to pinch every penny of your income.
Today, there are electronic versions of the envelope system, one of which Crown Ministries offers: Mnvelopes®. The people I know that use these kinds of systems all say that it has helped them get out of debt by living according to their budgets.
When you think about this, if you have written down a budget what good would it be if you never spent according to your budget? It would be simply an academic exercise. The budget is the best way to achieve your financial goals.
I have heard Dave Ramsey state that “every dollar needs a name on it.” What he is saying is that for every dollar you spend you know exactly which budget category (envelope) that dollar is coming from. And if you will, if you are not pulling it from an envelope, you are ultimately recording it somewhere that you spent that dollar in that category. Otherwise, how else would you know how much you spent it any one category.
Does this sound like a lot of work? Yes! But which would you prefer: living always from paycheck to paycheck, not having a penny in the bank; or spending some effort on ensuring that you spend according to your budget and meeting all of your financial goals? I hope that it is the latter, so please make the effort to spend according to your budget – It’s worth it!
So, when you are living on a budget, find encouragement every time you achieve one of your financial goals. Maybe it’s paying off a credit card balance or a student loan. Whatever the goal, rejoice in the hard work it took to accomplish this and be proud.
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