budgeting

Your budget: envelopes or a plan?

When I was first introduced to budgeting, the model used was the envelope method. Every payday you'd take your cash and divide it up among envelopes labeled "Rent," "Groceries," "Electric Bill," etc. Then, when it was time to shop for groceries or pay a bill, you'd take the money out of that envelope.

Just to be clear, even I'm not old enough that anyone I knew ever used actual envelopes. We'd keep the money in a money market fund or savings account (nowadays probably an internet savings account), and use a spreadsheet (or paper) to keep track of the categories. But the model was envelopes.

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Start with recurring monthly expenses

I tend to divide spending up into four categories. From best to worst they are: investments, items of enduring value, ephemeral items, and recurring monthly expenses.

Investments include not only stocks and bonds and such, but also anything that can help you earn money. Tools are an investment, as are a classes. I just bought two books that I'm reading before a possible job interview--they're an investment. Some investments may not pay off, but even unsuccessful investments are still investments.

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A Budget is Not a Constraint

When people resist the idea of budgets, the most common reason is that they view the budget as an unwelcome constraint. That's completely wrong. A budget is not a constraint. A budget is a tool for maximizing pleasure and satisfaction.

That's not to say that people don't operate under constraints. Everybody has limited resources. Everybody has limited time. Everybody operates with a whole constellation of other constraints: legal, moral, and social, from old obligations to family expectations.

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Save the World and Save a Dime: Eat Locally

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Budgeting for the rest of us, or How to follow a budget without breaking down in tears

Budgeting can be difficult. For some people (like me!), it brings up things that they may not want to see. For others, it's a necessary but frustrating tool to curtail spending, or a painful reminder of how much they overspent, yet again. But there are a few people who live well on a budget. These few manage to record their spending and yet aren't overwhelmed by that. They see where they spend too much and yet don't give up the budget. Month after month they take the time to collect their receipts, enter them, and evaluate based on the results. They aren't overwhelmed or discouraged, and they don't give up. Instead, they plug away at it until they get their spending under control, and then they often keep at it to have a record of their money goes. Slowly, slowly, I'm becoming one of them, and here is what I've learned along the way.

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