Budgeting Basics

Denisa and I are teaching a class for a women’s conference on Saturday for our church. It’s going to be about living frugally. Denisa’s going to be teaching the bulk of it, actually. Talking about how to shop and live for less. I’m coming to go over the basics of budgeting. The thing is, I’m note entirely sure my part will be that interesting. To me, budgeting is fairly straightforward at this point. It can be broken down into a few principles:

First, know how much money you make. I find it helps to be as pessimistic as possible at this step. Assume the worst and set that as your baseline. For Denisa and me, we assume that the only money we make comes from my job. Since I’m on salary, that’s pretty easy to calculate. I get the same each month. I look only at take home pay, after all taxes and deductions are taken out. That’s what I build our budget around. If you’re not on salary, you can get a good idea of what you’re actually taking home by looking at pay stubs for the past several months. Average it out.

Second, know how much money you spend. This one can be trickier. I remember right after I got my library job in Maine, Denisa and I thought we had Arrived. We had a house. We were bona fide adults. And we spent like we imagined bona fide adults with full time jobs could spend. Then we looked at our budget at the end of the month, and we realized how wrong we’d been. For the next several months, we kept track of all our expenses and logged them into Excel. It was a huge pain, but once it was done, I was able to categorize everything. (These days, I just use Mint for this job, which makes life tons easier. You register your bank accounts and credit cards with them, and they automatically keep track of your spending. I love love love the service. And it’s free.)

Once you know how much you make and how much you spend, then it’s a matter of making sure that you spend less than you make. Period. How you do that is going to depend on you and the decisions you make. Many things we view as necessities, aren’t. Cable? Internet? Cell phones? Restaurants? Fast food? Two cars? A house? I’ll hear people argue how each of those is a necessity, and they’ll come up with many reasons why their case is special, but I can say from experience working with the public in rural Maine, there are many people in this nation who get by without each of those, and they get by just fine. Necessities (in my book) are basic: nourishing food, health care, a safe place to sleep and live, clothing. Stuff you literally need to live. Some of that isn’t cheap. (Health care!) But you can ditch the other things long before you can ditch the necessities.

If you’re lucky, then you can make how much you spend be less than how much you make without too much hardship. But if you’re like many people, and those necessities just can’t be trimmed any lower, and they’re still more than you make, then you’ve got to go to more extreme measures.  You need to find a way to make more money.

One thing that never ceases to amaze me here in Maine is the way so many people come up with ways to do just that. Whether it’s selling eggs or substitute teaching on the side or getting a second job or baking bread or starting an Etsy business, I have seen people successfully add income to their bottom line. Between me and Denisa, we have many different jobs. I work at the library, but I also occasionally teach classes at the university, have done computer repair in the past, and I write books. Denisa rates TESOL exams online, bakes bread, and teaches at the university as well. The biggest trick is that as you find ways to make more money (through jobs or raises or saving tax refunds), you can’t increase your spending. You can’t say to yourself, “I just made $100 by selling bread. I deserve a reward.” That’s not how balancing a budget works.

I realize that for some, they just can’t make ends meet. There aren’t enough hours in the day, and their salary isn’t nearly enough. In those situations, I’m still assuming the overall goal is the same: get their life to a place where they aren’t in that situation anymore. And sometimes that can take a long time. Sometimes it means going back to school, getting in debt in the process so that at the end of it all, you’re better off. Sometimes it means picking a different career. Sometimes it means moving to a place that isn’t as expensive, or where there are more jobs.

When I write posts like this, I think about what people will object to. I realize that I’m in a place of privilege: I’m a white, male American who grew up in the middle class, then upper middle class, and then above that as well. When I’ve needed help, I’ve had parents who could pitch in to bail me out of tight spots. So I can definitely see why some people would read this, shake their heads, and dismiss what I’m saying as inapplicable to them for [insert reason here]. But I’ve talked to many people in many walks of life, and that whole “spend less than you earn” keeps coming up again and again. I know people who make six figures who are unable to stick to that rule, and I know people who make under 30,000 who are. Is there a chance that you are one of the exceptions? Sure there is.

But for 95% of the people out there, I believe this simple outline can and does work. For me, it’s the same as dieting. People know how to lose weight. Any doctor will tell you the method that will work for the majority of people out there: diet and exercise. Keep track of calories in and calories out, adjusting for personal metabolism and circumstance, and most people can make an impact on their bathroom scale. But you have to do it day in, day out. You have to not cheat. And it’s flat out more fun to eat whatever you want, as much as you want, whenever you what. It’s easy to overestimate how many calories you burned mowing the lawn or exercising, and it’s even easier to eat all those calories and more when you chomp down on a brownie. (Personal experience speaking here.)

So instead of making a lifestyle change or really committing to a diet or a budget, people look for alternatives. Diets that promise you can eat what you want. Get rich quick schemes. Ways around doing the hard work. And if you’ve found such a thing, more power to you. I personally doubt they exist outside of getting lucky.

At the end of the day, the basics work. They’re not fun, but that’s life.

Anyway. We’ll see how Saturday goes. Can I manage to do this without getting on a soap box? Tune in and find out . . .