How I Use My Budget to Think Better About Money

How I Started

By nature, I am a frugal person. I was never one to spend more money than I had or buy things I would never use after a month. Despite this, I felt an urgent need to start budgeting three years ago, because I had no way of knowing where my money was going or how much I could be saving. Ultimately, budgeting is about knowing your money.

Budgeting can feel overwhelming in the beginning because, for the first time, you are putting accountability to the way you spend your money. But, it also helps you think about how you spend your money now, how you hope to save for the future, and also displays how you did in the past, so you can learn and grow.

Budgeting is a powerful tool to shape your behavior. It took me several months into budgeting to start to let my budget shape the way I spent my money. Prior to this mindset shift, I spent money and inputted it into my tracker without giving much thought to whether I was going over the amount I had preset for the category for the month. Once I was more conscious about if I was within budget, my finances became more predictable and I could plan better for the future, because I knew roughly how much I was spending in each category and how much I could save.

What Budgets Look Like

Your budget is in some ways reflection of you – it can be simple and straightforward, detailed and thorough, rough estimates, or exacts. I was determined that our budget would be an exact representation of every single dollar that came in and out. This decision had consequences – many times, I pored through bank statements, Venmo transactions, and checks to perfectly reconcile every cent. But this was how I wanted to do it. If you’re not the type to waste time over details, use more of a summary approach to budgeting to get a rougher idea of how you are spending your money.

When I first decided to make a budget, I spent a lot of time looking for a template. I knew that if I didn’t like the information that I got from my budget, I would end up not using it. I landed on this free budget template. Over the years, I have customized it to work best for me, but at a basic level, I liked the functionalities of the template. Find one that works for you. There are so, so many out there.

Making it Work for You

Next, for the first few months, just track. Don’t be too strict about trying to meet the budget you set for each category, but just observe. What do you spend a lot on? Where do you have lower expenses than you expected? Are you actually making as much money as you thought? What is one area that you want to be spending more of your resources? This helps you see what your spending habits are and make active decisions to shape them into what you want them to be.

For the next year or years, make goals. Do you want to save money for a healthy emergency fund or a vacation? Do you expect to have to make a big purchase in the next 2-3 year? Do you want to finally be debt-free? Use these goals to shape how you earn and spend your money. Track progress toward these goals to motivate you, as restricting spending can be hard sometimes without having a clear goal in mind.

At times, inputting data into your budget can seem tedious and annoying, but a budget is ultimately a powerful tool that only is as helpful as you make it. A budget with consistent missing information will not be as helpful as one that has all your data, so you can track changes over time, see patterns, and implement behavioral changes based on what you see.

Conclusion

I hope this helped you see how to use a budget to serve you and help you think better about your money. Used poorly, budgets can make you feel overwhelmed about your financial situation but leave you at that point. Used well, a budget can be your partner in figuring out next steps, reaching financial goals, and changing your behavior to make wiser decisions.