At the end of each month, my wife and I set aside time to do the important task of creating our monthly budget.
It’s something we’ve been doing for about 7 years now, and has become an important part of our simple living lifestyle. If you haven’t already read it, I’ve written before on the benefits of doing a budget.
The monthly process of creating our budget takes about 45 minutes from start to finish. This is time that I see as well spent, as the effort spent here pays dividends throughout the rest of our lives.
I’d also note that while my wife doesn’t enjoy the budgeting process as much as me, she understands how important it is for us to control our finances together. For us to be able to build the life we want, we know we need to budget.
Our Monthly Budget Process
We always do our monthly budget at the end of each month. This way we can fully understand how much money we have to budget based on our current account balances. We also block off this time, so that we can focus solely on this process.
To do our budget, we use the tool YNAB. After trying multiple different budgeting tools, YNAB is my absolute recommendation for people to use. It’s a robust budget tool, with all the resources you need to budget effectively.
Our monthly budget process looks like this:
- Reconcile Our Accounts – We start by making sure that all of our banking and investment account balances are correct. We reconcile each account one-by-one, adding/editing transactions in the budget to match the transactions that took place. This is the most tedious part of the process, but important to make sure that your information is accurate.
- Review Spending/Saving – We then review where our money was spent and saved in the previous month. Are we spending too much money on some areas? Did we come under budget in other areas? Are we saving and investing money to meet our future goals? This part of the process can be rewarding to do as you begin to achieve more of your financial goals.
- Budget for Next Month – Finally, we budget all of the unassigned money in our accounts for the next month. We tell our money where to go! Every single dollar gets assigned a task, be it for spending, saving, or giving. We consider what unique spending might be required month-to-month. Together, we prioritize our money across the various categories in our budget.
That’s it!
It does take time to build the habit of tracking your transactions, learning your spending levels, and prioritizing goals. It took us about 3 months before we fully started to create and maintain our budget effectively. However, it’s a process that’s well worth it for the peace and financial security it brings.
—
This post is Day 14 of 21 Days of Simple.
Leave a Reply