One of the ways Matt and I are able to get ahead financially at such a young age, is by simply budgeting our money. It has taken a while to perfect, but we now have established a really great system that works well for us both. I wanted to start by sharing a few basic tips! To read other great budgeting tips before you buy your first home, visit this post.
First, depending on if you (or your spouse) are paid weekly or bi-weekly, I recommend setting up an auto-payment system for your loans and bills the DAY you get paid! This can be done through “Bill Pay”, if your financial institution offers that or through the loan/debtor directly. For example, if your mortgage is $800.00 per month. Why wait and pay the full $800.00 on the 15th of every month, when you could just be paying $200.00 per pay period?! After a while you get used to that $200.00 not being in your bank account on payday and know what money you truly have left to spend.
This works great with student loans, home equity loans, mortgages, car loans, credit cards, etc. and what’s even better, is by paying on your loan WEEKLY you cut down on the amount of interest you pay back for the life of the loan!! Ultimately paying your loans off sooner! SCORE!!
My second tip is to set up an excel spread sheet with your Assets and Liabilities. I’m no accountant or finance expert, but doing this has help our budget management immensely! On the Asset side of my excel sheet, I list all our bank accounts, investment accounts, properties, cars, trucks and equipment. I am constantly updating the figures so that I have an accurate depiction of how much money is actual cash, how much is investment income and what current values including depreciation of our properties and equipment are. On the Liability side of my excel sheet, I list all our outstanding loans with amounts and credit cards. Even if our credit card balance is $0.00, I list it, because that credit card is still a liability and that balance may change in the future.
By doing this, I am able to see the equity that we have built together. Every 1-2 weeks I continually update our personal balance sheet so that our bank account balances and loan amounts are accurate. Thanks to online banking, this only takes about 5 minutes to do! I have played around with different accounting programs (QuickBooks, Sage, etc.) but they all seem to be too complicated for our basic budgeting needs, and again, I am not an accountant. We just needed a way to be able to see our general financial situation from one place. Excel worked and it’s free.
My third tip is to take take out some cash each week – maybe $100.00 and use that as your spending money, instead of using your credit card or debt card. I find that using real money, rather than a piece of plastic makes it easier to budget and stay WITHIN budget because when it’s gone, it’s gone!
I hope my few tips were insightful and helpful! I’d love to hear other great tips and feedback about how others budget?
Sooner than later,