According to Jess, “this is the step where you dump the stuff that isn’t needed for the life you want to live. Just like our skin, there is a lot of dead ‘skin cells’ in our homes that are clouding the healthiest, best life we want to live. And by sloughing off that unnecessary layer of crap, we emerge brighter and more purposeful.” Guess what? There might be some dead skin cells lurking around your budget as well. But first, you need to take a look in the mirror see what and whereÂ they are.
This makeunder step may be the most daunting since it involves accumulating the information that makes up your past and current financial situation.Â Through the magic of the Internet and computer software, it doesn’t have to be that difficult.Â I use mint.com to compile all of our financial data. It’s a fantastic free (and secure!) siteÂ that offersÂ personal finance and budget software, online money management, and budget planning. Mint brings all your financial accounts together online so you can see the big picture in a single click. We have our checking and savings accounts, credit cards, and 401(k)Â and investment accounts allÂ feeding into our Mint account.
So what do you do with all of that information? Mint categorizes your transactions (with some of your assistance) so you can see how much you’re spending on rent, food, entertainment, shopping, etc. It also monitors income, loans, and investment transactions. It was pretty eye-opening even that first month of using Mint. I had no idea how much I was spending on lunches or coffee during the work week. (John is really good about bringing his lunch to work.) I thought that the couple dollars here and there wouldn’t make a difference until I saw the grand total at the end of the month. $130 even though we bought lunch food at the grocery store? Yikes! On the flip side, we didn’t spend much money shopping.
After you’ve had a chance to dive into the nitty gritty, it’s time to develop a budget! There are as many budgeting methods as there are diets. You never know what’s going to work for you until you give it a whirl. And like a diet, if you’re going to be saving money it’s all about input vs. output. You can spend less, earn more, or a combination of the two.
I rely on Mint’s built-in budgeting software to set our monthly targets for each major spending area. Mint also allows you to adjust your budget. For example, Mint first thought a good amount for Movies and DVD’s was $20. We rarely go to the movie theater, choosing to rent from Redbox instead. I bumped that monthly budget down to $10.
- 50% Needs, 20% Savings, and 30% Wants (see Daily Worth)
- Save to spend budget: 60% Monthly Expenses, 10% Retirement, 10% Long-Term Needs, 10% Short-Term Savings, 10% Fun (see Daily Worth)
- 35% Housing, 25% Living Expenses, 15% Debt, 15% Transportation,Â 10% Savings (from Jean Chatzky)
- Dollars per day for play (see Pete Mockaitis)
ï»¿ï»¿One of the other benefits of Mint is that it sends me alerts when I go over budget. They also email me weekly updates. It’s like my personal accountability partner. Speaking of accountability, share your goals with a significant other or trusted friend. You will be more likely to succeed when someone is cheering you on and helping you over hurdles. ï»¿ï»¿
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John and I have been more open about how we spend our money over the years so that we can work towards a common goal of home ownership. I don’t have to ask his “permission” about purchases, but if I’m wavering, I check in to see if buying something is “worth” more than saving for our goal. Plus, there will be fewer surprises or busted budgets.
What are your secret ways to cut costs or earn a little extra? Would it be helpful if I shared some ideas?
(Disclaimer: I haven’t been compensated by Mint for this post. These are simply my opinions. But if you’re out there, Mint, I wouldn’t mind writing for you!)