Finance Friday: Budgeting!

Be honest, when you heard the word budget do your palms start to sweat?

Maybe a little?

When you hear the word budget what’s the first thing that comes to mind?




Totally understandable. All our lives we’ve been told we have to budget. Television pundits tell us how much money we waste on Starbucks coffee, or clothes or gadgets and how this makes us bad people. It’s all pretty silly honestly and does more harm than good. I’m going to ask you to think about budgeting in a different way. It’s going to blow your mind. Ready?

Really ready?

I want you to think about budgeting not as deprivation but as prioritization.

Ok, I probably oversold that whole mind-blowing thing but it’s an important distinction. Deprivation is de-powering. It’s something being taken away from you. Prioritization is just the opposite. It’s empowering and is all about you deciding what is important to you. And that’s all budgeting really is. It’s taking money away from areas that don’t matter to you and putting it in areas that do.

So now that we’ve redefined what budgeting is the question now is why.

Seriously, I want you to think about it. Why should you budget?

“Because people tell me to” is not a valid reason. If this is your reason then I’m sorry to say you’re very likely going to fail. You have to find out what your reason is because that’s the only thing that will motivate you. Perhaps you want to get out of debt. Perhaps you want to save for your education. Perhaps you want to save for your kids’ education. Perhaps you want to be able to retire someday. Perhaps you want to take an around-the-world trip. Perhaps there’s an awesome dress/bag/pair of shoes/whatever that you want but you know it will break the bank. Whatever the reason it needs to be your reason because budgeting is all about clarifying and supporting your priorities in life.

I’m going to say that again because it’s important: budgeting is all about clarifying and supporting your priorities in life.

Think about the patient’s we take care of. Sometimes we wonder why they don’t change their ways, what hinders them from putting their health first. Fear maybe. Laziness maybe. Maybe they’re only in the pre-contemplation stage in readiness to change (I know, I know… I totally just brought the Transtheoretical Model (Stages of Change) theory into this… Nerd alert!). Or maybe it just isn’t a priority in their lives. Find your WHY! Why is budgeting important for you specifically. How will budgeting benefit you in the long run. This is how we (Snark 1 & SnarkyDoc) changed our thought processes about budgeting.

So, now what we’ve gone through the whats and whys, let’s get into the how.

Ways to budget
Even though I don’t know you in person, dear reader, I bet I can guess how you’ve budgeted in the past. Ready?

You get a bill you weren’t expecting and were totally shocked
You resolved to “get your act together” and “start a budget”
You made a list of things you weren’t going to do. This included “not eating out” and “not using the big bad credit card”
You spent the two days strictly adhering to this plan. You were miserable.
You crack and bought yourself a latte. Then, before you knew it, you were back doing what you were before.

Sound familiar?

When people try to budget they mostly fail. The reasons for this are many but a common one is that they become too restrictive with their spending. To go from spending a lot of money to spending no money is hard for everyone and not sustainable. It’s the financial equivalent of a crash diet and it just doesn’t work. To make budgeting sustainable you have to take a look at yourself, what you want, what you like and make some decisions. Another common one is making a budgeting system that is way too complex and unsustainable. This is like going from never working out to deciding to do a crossfit workout without any supervision. It’s just a bad idea.

How to really budget

The first thing to do is categorize where you spend your money. Your temptation here is going to be making too many categories. Don’t do this. You don’t need separate categories for coffeeshops, fast food and restaurants. A single category called Eating Out would suffice. Common categories (with examples about what goes in them) are below:

  • Utilities: includes water, electricity, internet, phone
  • Home: rent or mortgage, home or renter’s insurance, repairs
  • Car/Transport: car payments, bus passes, car insurance, gas, repairs
  • Food: groceries and eating out
  • Entertainment: movies, music, games, etc
  • Student loans (if you have them read our post from last week here)
  • Health: health insurance, medications, co-pays
  • Travel
  • Gifts
  • Goals: saving for specific larger ticket items
  • Emergency fund: for unexpected large expenses (see below for details)

Again, this isn’t an exhaustive list. You can use some of these, all of these or anywhere in between. There is only one category I would suggest you absolutely have and that is an emergency fund.

What is an Emergency Fund?
Exactly what it sounds like. This is money you have put aside for unexpected big expenses. This isn’t where you take money from when you want to buy a new car or take a trip. This is purely for real emergencies. How much you put in there is entirely up to you and your circumstances. Even if you don’t have money to put into your Emergency Fund right away having it in your budget will remind you to start filling it once you get your finances under control.

Find out where your money has gone
To know where to go you have to know where you’ve been. Translating into non-fortune cookie speak I mean that you need to figure out where you spent your money last month to help you get a realistic idea of where you stand. So look up your credit card statements or go to and start totaling up each category either on a piece of paper or in a spreadsheet (Google Docs or Excel are fine choices). I know, this sounds super tedious. I’m not gonna lie, it kinda is. BUT. As you go along you’ll start learning all kinds of things about yourself. You’ll probably be surprised more than once. Once you’ve done this you have a basic idea of where your money goes. If you’re feeling really ambitious you can categorize another month and average it to get a more realistic idea.

So now you have your categories and how much you spent last month. Awesome. If the total is less than you made last month congratulations, you’re in the green. Queue the balloons, rainbows and puppy dogs. If it’s less than what you made it’s sad trombone time. However, regardless of which side you’re on there’s always progress that can be made so let’s get to it shall we?

Now here’s what I don’t want you to do. I don’t want you to slash the amounts in every category down to some ridiculously low number and promise yourself you’re not going to spend beyond that amount. It’s not gonna work. We aren’t here for a crash diet. Instead, what I want you to do is to look at those categories and decide what’s important to you. Here’s an example below:

Bertha is a PICU nurse. She did the above exercise and found out this is how much she spent in January of this year (for purposes of simplicity I’ve limited the categories here). She makes $3000 per month after taxes:

Rent $1500
Auto/Transport $500
Utilities $300
Student Loan Payment $300
Entertainment $300
Health $50
Eating out $250
Groceries $50
Clothes/Haircut/Shoes/etc $200
Travel $100
Gifts $100
Total Expenses $3550


Now I bet some of you looked at this spending and immediately went into judging mode. It’s okay if you did. It’s a pretty natural reaction. However, the point to make here isn’t that Bertha should spend money how you think it should be spent. Rather, Bertha should spend money how Bertha thinks it should be spent. So let’s look at Bertha’s priorities:

Bertha loves living alone.

Bertha loves going out after work.

Everything else she doesn’t care about. So how can Bertha budget? Well, she can do a few different things. Perhaps Bertha didn’t realize how expensive her car was. Perhaps she can downgrade it to something less expense or with better gas mileage or even get rid of it altogether. Maybe she’s surprised at how much she spent on clothes that she doesn’t really care about? That’s another place to cut from. Perhaps she also is surprised with how much she’s spending on eating out and can pack lunches to avoid eating out as much. There are loads of things she can do. What should Bertha not do? Bertha shouldn’t stop living alone and she shouldn’t stop going out. Why? Because it’s important to her. And that’s the whole idea. Bertha should cut from areas she doesn’t care about to support the areas she does.

Now Bertha may cut from unimportant areas and still find herself spending more than she has. At that point, Bertha will have to make some more decisions. If living alone is important to her but she can’t afford it, maybe she can move to a different part of the city that is a little less expensive. Or maybe she could pick up an extra shift to supplement her income. It doesn’t matter what she does as long as she is respecting her own wishes in the matter.

Once you’ve budgeted in your categories you then move forward to the living of your life. As you go along you will need to find a way to track where your money is going (more on this in a later post). At the end of the month you can total everything up and see how you did. If it wasn’t perfect, that’s okay. Just adjust and move on. If you’re finding a category is too restrictive, try to move money from somewhere else. You’re aiming for long term change so it’s going to be an ongoing process.

Stress and budgeting
You may be thinking that all this sounds stressful. It might be at the beginning but I can promise you this: there is no better stress relief than knowing where your money is going. Once I got a realistic budget in place I found that I was way, way, way less stressed about money. Not living paycheck to paycheck is incredibly liberating and totally possible. You just have to start. The best time was yesterday. The second best time is right now so get to it dear snarks.

In our next post we’ll talk about different budgeting software that can make this whole process much easier. See you next Friday!

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2 Comments Add yours

  1. KDurg says:

    this is the coolest idea, this budget Friday! I love it!

    1. Snark1 says:

      Thanks Friend!

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