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Have you been thinking about starting a budget, but don’t know how?
Starting a budget can change your life. Seriously!
I have been consistently budgeting for about five years, and it truly has changed my life and my finances. When I first started, I had roughly $45,000 in student loan debt with no real plan to pay it off.
I also just started dating my future wife Jenna, and within a year we got married. I didn’t realize it then, but my student loan debt was about to double to $90,000. YIKES!
So there we sat with $90k of debt with nothing but hopes and dreams of paying it off. But the silver lining was we were learning how to budget.
Now, five years later we are coming up on our one year anniversary of being debt free! I can promise you that we would still be highly in debt if I never made that very first budget.
Are you ready to see how a budget can change your life?
A Budget Helps You Set Goals
Before I started budgeting, I didn’t really have goals. That sounds really weird and kind of sad to say. It reminds me of Vince Vaughn’s character in Dodgeball:
“I’ve found that if you have a goal you may not reach it. But if you don’t have one then you’re never disappointed. And I gotta tell you, It feels phenomenal.” ~Vince Vaughn
Credit: Dodgeball via Carbon Costume
I laugh thinking about that quote because it sounds SO ridiculous! But five years ago, that was me. I guess that’s not entirely true. At the time I wanted to be a teacher with my own classroom and get married and start a family. But other than that, I was goal free.
The first goal we set was to be debt free in five years. It was crazy and sounded ludicrous, but it was a goal we believed in and trusted Jesus to help us with. After all, He’s the one who gave us the idea. If you have debt and are just starting a budget, this is a solid first goal to make: become debt free.
To help give us direction, we made a ton of smaller goals that acted as stepping stones to get to our big goal. We analyzed each loan and calculated a pay off date. Each of these goals was smaller and felt much more achievable.
We worked our butts off, and one by one, we accomplished each of our smaller goals. Each time we crossed off a goal, it gave us more confidence and motivation to reach our ultimate debt free goal.
Now, even after becoming debt free, our budget still helps us create goals. Right now we’re saving up for a minivan to help us travel with our growing family. Two dogs and a baby are a lot to carry around on long road trips to visit family. Plus minivans are super cool! Have you seen how much space they have for storage?!
We also just saved enough money to fully fund our five year anniversary trip to Ireland next year.
You will accomplish more in your life if you have goals. Your budget is a great way to get started.
You Will Become More Productive and Proactive
A side effect of creating goals is becoming more productive. The goals you set are the endpoint, the place your future self will end up. Your budget is your road map to getting there.
Your budget gives you a plan to follow, and when you have a plan you’re going to get more done!
A budget isn’t a magic button that erases all of your debt or turns straw into gold, but it is a tool to plan where your money goes. I love to budget because it allows me to be in charge of my money and tell it where to go, instead of me standing there sadly watching my money disappear.
A key component to being in control of your money is planning how you’re going to spend it. I suggest planning out your budget at the start of every month. It will give you an idea of upcoming expenses unique to that month and help you be more proactive.
For example, we know that girl scout cookies go on sale in February and Pumpkin Spice Lattes and Pumpkin Pie Blizzards pop up in October. We intentionally plan for an extra $20 in each of these months to enjoy our favorite treats.
And if you have a flexible income, you’ll get a better idea of how much money you need to make to cover your expenses, or find ways to cut back if your income is going to be less than normal.
The Best Budgets Plan Out Every Dollar You Spend
This is good for a couple reasons.
1.) You will know how much progress you’re making toward your goals.
2.) It allows you to focus on eliminating unnecessary spending before it happens, making for fewer surprises.
3.) You get to choose your priorities of what is most important to you.
Where you spend your money tells a lot about what you value and what’s important in your life. If you decide you’re paying too much for something, like dining out for lunch, you have the power to change it.
And although it might hurt at first, using a budget highlights your bad spending habits. Without our budget, we didn’t realize exactly how much we spent going out to eat. We knew it was a decent amount, but until we saw $150+, it didn’t sink in that we needed to make a change.
If you are like most people I know, including me, it feels better and more comfortable to be in control of your situation.
A Budget Puts Life Into Perspective: You Learn What Truly Matters and What Doesn’t
I alluded to this a bit earlier, but it’s worth mentioning again. It’s hard to argue with cold hard facts. A budget shows your spending habits plain as day, and there’s a high correlation between your spending and your priorities.
It took us a few months, but we finally figured out how to make sure our budget accurately reflected how we wanted to spend our money. We learned really fast that we didn’t want to spend money going out to eat or buying clothes. On the other hand, we didn’t have a lot of extra money to spend on unnecessary things and still accomplish our goals. It was one or the other.
Just for fun, I geeked out and made sweet charts of our budget over the years. Each graph shows our top 10 expenses for the year. It’s cool to look back and see how our priorities and values have changed over the years. Not only that, but I can see the work we’ve done to accomplish our goals and the goals we’ve actually accomplished.
Students loans have been a huge part of our story and have consistently been our highest monthly, and yearly expense. It was our top priority to throw as much money at our loans as possible so we could reach our real goal of starting a family. And our income was pretty limited in 2014, so we didn’t have many expenses beyond these 10.
In 2015 we got 2nd jobs at a restaurant, which we still have, and that increased our income by a lot. We also got promotions at our teaching jobs, upgrading to full time teachers! More income = more money to throw at student loans. You can also see we add Life Insurance and Roth IRAs to our financial foundation.
In 2016, student loans hit an all time high as we stretched hard to become debt free. We didn’t quite pull it off in 2016, but got darn close! We also increased our contributions to savings. Our priorities were student loans, but we also wanted to plan for future vacations, add to our emergency fund, and save for appliance upgrades.
In 2017, we finally became debt free! Once we did that we started contributing more to our Roth IRAs, and paying extra on our mortgage. You’ll notice we paid over $1,000 for clothes, which seems out of line with our priorities over the years. However, my wife became pregnant part way through the year so we invested money into maternity clothes, which are NOT CHEAP!
Plus, since we were debt free, we spent a bit of money updating our wardrobes which we hadn’t done in years!
Over the years our priorities shifted slightly, but our top expenses accurately reflect our goals and where we truly want to spend our money. Our budget will continue to keep us on track to reach our goals in the future.
A Budget is the Best Tool I Know of to Get You of Out of Debt
When we started our first budget, we had $90,000 in student loan debt, plus some credit card debt, and car payments. Thanks to our budget and willingness to stick to our goals, we’re debt free and tackling our next round of goals.
I can honestly tell you that without our budget, we’d still be drowning in debt, renting a one bedroom apartment, and sadly, we wouldn’t have our beautiful daughter. It just wouldn’t have been financially possible to afford childcare and student loans.
Any good superhero needs a sidekick. So if your budget is Batman, then you can call Debt Log his trusty sidekick Robin. Our debt log is based on Dave Ramsey’s Debt Snowball and helped us track our debt and create goals to pay it off.
Because our budget and debt log have been so instrumental in paying off debt and achieving our goals, I created fully customizable versions for you to download and change your life.
Let Me Know in the Comments
How has budgeting changed your life? What goals are you attacking right now?!
Our budget and goals changed our lives and it can change yours too.
Our budget and goals changed our lives and it can change yours too.
As an Educator and Personal Finance Blogger, Jamie has helped hundreds of families learn how to budget, save money, and pay off debt (go here to subscribe and start your debt free journey). Read our debt free story, “How We Paid Off $73,000 of Debt in Less Than Four Years”.
