Financial independence is a pretty ambitious life goal. Particularly when, like us, you started from a base line of zero wealth or assets with no family money to trickle your way. Budgeting money, therefore, becomes pretty high on the agenda as a way to track your progress and keep you on the straight and narrow. That said, everyone should take budgeting seriously but just like lives differently, everyone budgets differently. So, how do we budget?
recording all the pennies
We have always tracked every single penny with a household budget. And when I say every single penny, I mean every. single. penny. We’ve had the odd remark over the years from friends about how crazy we are to track so closely when we’ve discussed how we all manage household finances. But it works for us and that’s what matters.
When me and Mr. NC moved in together, we opened a joint account, had our salaries go into it (we don’t have separate money), and created a household budget in an Excel spreadsheet. Over the years, our budgeting process has become more streamlined, advanced and easier but in the early days, we saved all our receipts and manually entered the amounts into the spreadsheet.
- each receipt was attached to a category in the budget
- we then checked our budget against our current account/credit cards to make sure it all balanced
The first evolution of our budget was the building of an Access database and a rudimentary form to input receipts. This was a mixture of using Access and Excel.
The next iteration was a transition over to Google Sheets. This was a huge transition as it meant we could access it anywhere and not need to necessarily be at our computer to work on it or check something. The next huge (and most impressive I think) step was the creation of a budget entry Google form.
Another great thing we did with the move over to Google Sheets was to create the budget summary you see below. This was borne out of me constantly asking to see how much we’d spent on a certain category throughout the month on the spreadsheet. We put the categories we spend most of our discretionary income on and created this quick glance guide we keep on Google Drive.
I used to keep a running tally of how much I’d spent on food shopping for the month on my phone but now I just quickly check the budget summary and it gives me the most up to date spending on a category.
The way we money isn’t for everyone; I’ve had enough comments over the years from friends about how crazy they think we are with our budgeting process to know that not everyone (anyone?!) would be interested in doing things this way.
However, managing your money is important. The most helpful things you can do for yourself are
- list mandatory expenses for the month
- list discretionary expenses for the month
- put £ amounts next to each category
- record your spending
- check against your bank/credit card accounts to ensure the budget is balanced
- rinse and repeat the following month
Doing this for a few months would help you to see where you’re spending your money and how much you’re spending. You soon get a handle on the rough monthly expenses for certain categories which means you’re more confident in your spending because you a) know how much you roughly have to spend and b) know how much you have already spent as the month goes on.
Doing this for a year then gives you the data to know when certain purchases come out so you can begin to budget for them ahead of time. Things like birthdays, annual insurance premiums, car MOTs and Christmas occur every year but these are the sorts of expenses that can catch someone out and have them scrabbling to find £700 when they need a new handbrake and clutch at the MOT.
It can take time and effort to get a handle on and build confidence in managing your household budget – I know it did with us. However, once you have a handle on it, it can strip away so much money stress and frustration and allow you to focus your attention on other, more exciting things.