Personal finance: Using a budget

In late January I began using a formalized budget, which I update daily. I thought it was a great thing to incorporate into my personal finance habits prior to buying an apartment. It's based on the format of YNAB (You Need A Budget), the for-purchase software that Meredith introduced me to. She urged me to read the 4 basic rules of the budget that explain the thinking behind the program, and from there I got to work on my own Google Drive spreadsheet. Find their philosophy and purchase the program here.

The basis of the budget is that every dollar of income has a "job" and so as you use your income to spend, save, or pay off loans, there is never just an unclaimed chunk of money in your bank account tempting you to blow it on something unnecessary by breaking down your cash flow into manageable categories. It also allows for slip-ups, as you can update your budget categories throughout the month to adjust to real spend.

February will be my first full month of using this budget, and I've already found that I feel so much more in control of my money, and the panic and stress that I used to associate with financial planning is starting to subside. It's influenced me to be much more thoughtful about my spending, as I have to log each transaction into my spreadsheet. It's also allowed me to plan for future expenses, such as Emily's September wedding and a 2015 trip to Italy.

The trick, I think, is to set up the budget in a way that is encouraging - so following Meredith's example, I have a line for "Spontaneous Spending" so that I don't feel like a failure when I go out for impromptu sushi, fall in love with a dress, or have to repair a watch. That and using pretty colors in the spreadsheet.


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