Okay so this would be a much cooler post if it were written by Justin Timberlake but it isn’t. It is written by a lowly PEM attending in flyover country. Father’s Day was 2 days ago and as is appropriate on days like this (Mother’s Day and Thanksgiving also cause me to be reflective) I thought about something that my parents taught me. They instilled in me from a young age the need to be on a budget. Not the kind of kill yourself if you spend one penny over in a certain category budget, but more a know where your money is going, make sure you live beneath your means, and pay yourself first kind of budget. Today we will tackle knowing where your money goes. (We already covered the need to live below your means in my post about living like a fellow.) My dad was and is my mentor in many things and financial matters is no exception. He talked to me a lot about money when I was growing up because he didn’t have any when he was a kid. In fact, he grew up on “welfare.” He would tell me stories of going to school with cardboard in his shoes because there were holes in the bottom and tying weights onto his one pair of pants he got each school year to stretch them and make them fit as he grew taller. My father wasn’t fixated on money, but he did feel it was important to impart a certain level of financial intelligence to his children.
A budget is all about knowing where your money is going each month. There are lots of ways to do this. If you use a credit card to pay for everything some cards will tell you exactly how you are spending your money down to the penny and break it down into categories. Some credit card companies do a pretty good job of this like the Discover Card. Each month I can log in and see how our spending categories break down. This strategy has holes in it though. It won’t count any cash you spend, checks you write (yes, some people still use these!) and it won’t count automatic transfers you have from your bank account to other places like is common to pay for some bills or make contributions to investment accounts or other transactions.
A well done online budgeting tool that takes most of the work out of it for busy people like us is www.mint.com. With mint you have to give them ability to see your different accounts and it will keep track of every dollar you spend, including ATM withdrawals, automatic transfers and bill pays. You have to put in some leg work at first to set budgets for all the main categories of spending you have and then mint will keep track for you every day how are you are doing on staying under budget. It will even email you if you go over budget in a certain category.
Both of these methods presume that you have a basic budget set out and know how much you are spending in your life. If you don’t know how much you spend, or even if you think you do, I would recommend that you go back at least 3 months but preferably 6-12 months and see what you actually spend each month for clothing, gasoline/transit, rent/mortgage, daily latte runs, gym memberships, entertainment, wireless, internet, app purchases, etc, etc… Until you know what you are actually spending you CANNOT come up with an accurate picture of your spending situation.
The word budget makes most people groan because it signifies limits, rules, restrictions and the opposite of fun. While I won’t argue that making a budget will rival a good time out with friends, a vacation to the Caribbean, or a new car, a budget can make all of these things a possibility!
In summary, take a note from my father who is currently redoing the two bathrooms at his house–get a budget and stick to it!
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