Baby r&R turned one in April and a shift occurred in my household – we. became. PARENTS. Yeah I know, technically we became “parents” (noun) when he was born. But then he learned how to walk…so now we’re PARENTS (verb) of a toddler (also! verb!).
When we were noun-parents, our primary job was just to be the people that kept him dry, safe, and fed. Becoming verb-parents introduced different responsibilities….
And with that, he’s becoming more “expressive” – that’s the new word for tantrums, ya’ll.
What it all amounts to is every day is different. He learns by watching, so there is this constant dynamic where I am trying to figure out whether his actions are shaped by mine, or if it’s the other way around. Turns out, there isn’t a perfect answer – it’s both!
I’ve learned that parenting can’t be neatly mapped to a series of direct cause and effect paths. It can’t be packaged up into neat little milestones, even though we’re trained to think that way. Parenting is happening all at once and all the time; the obsession with “trying to figure it out” is just a function of the way we talk about it.
The same can be said for money, and more specifically, for budgets.
Most budgets fail us because the intention gets lost in the format. Money may be a limited resource, but it’s not a rigid and inflexible one…so your budget shouldn’t feel that way.
So, here are 3 quick tips to shift your mindset and create a more reliable budget:
1. Don’t get category crazy, clump and dump.
You’ve seen our budget, we clump all of our expenses into 6 broad categories and the rest gets dumped into investments.
Having too many categories puts you at risk of making the smoke the main event, instead of the fire. Clump your fixed costs first (these are the items that are not going to change like home and food) and then move to your discretionary expenses. Discretionary expenses are trickier because some of them have definite endings and some don’t, some are one-time expenses and others aren’t.
To tackle this, we group these into evergreen categories of Entertainment, Personal/Giving and Insurance. This helps us to have broader conversations about the choice behind each expense, instead of the amount. Were we bored? (Entertainment) Were we compelled? (Giving) Does it really need to be protected? (Insurance)
2. Pay attention to the F-word.
Not that one…I mean the other four letter F-word you should be offended by: FEES. If you don’t have a way to account for them, your budget will come up short and your milestones will be less reliable. Fees have a lot of different names but they’re usually hidden in plain sight, you just need to look for them.
If you’re in a season of debt payoff, look at your next statement so you know how much of your monthly payment is going towards interest and what percent is going towards the balance. You may be surprised! When we were paying off our mortgage, we knew ~70% of the standard monthly check was used on interest, so we would make a separate payment and specify to the bank that we wanted it applied to the principal. I encourage you to create a category in your budget just for fees so you can monitor your progress against reducing this expense. Mint can help you with this, see mine below. I’m kicking butt!
3. Pay yourself FIRST.
Yes, go ahead. I give you permission, go FIRST! treat yo’self! I can’t stress how important the word FIRST is here. Honestly, this is a matter of mastering your own psychology more than it is a tactic (although if you have direct deposit and can route money off the top, that certainly helps) but it is so important.
Before you pay a bill or buy ANYthing, transfer some money to a savings account if you don’t already have a fully funded emergency fund, or an investment vehicle if you do. Put your oxygen mask on FIRST.
Bottom line: The ideal budget should be aligned and in sync with your values over time. Alignment gives you the freedom to change your mind and time gives you the space to develop a relationship with your money and endure different seasons.