One of my goals for this year was to take our family budgeting to ‘the next level’.
For the last year and a half we have been using a reverse budget and tracking our spending as a family with the Smart Budget app.
This method was great because it gave us a good financial snapshot of our income and spending without being too demanding on us. There was just one budget number to stick to instead of a dozen.
I tried repeatedly to get into a set budget when we first started to pay off $82,000 in debt but I failed. I failed a lot.
No matter the method, Excel spreadsheet, fancy financial software or pen and paper notebook, I could never stick to a budget or tracking for very long.
I was repeatedly overwhelmed both with how many bills we had and the demands of entering all of them into one system. I’d try one system for a few weeks, fail, and then try another system and fail again.
Was I weak of will? Was I not choosing the right software? Was living within a budget and tracking expenses beyond me?
No. None of those answers are right.
What I can see now, after having found success with budgeting and tracking, is that I was trying to run before I could walk. I was trying to change everything overnight instead of a few small things at a time.
It wasn’t until we had paid off a lot of our debt, dramatically cut our household bills and spending, that we made any financial software, app or tracking method work for us.
We needed to take those small steps – cancel a few bills, give myself a ‘fun money’ budget each month, calculate what we’re actually spending on groceries every month and then try and stick to the average for a few months – so that we could eventually make the big leaps.
Why change if things are working?
The reason we are making this next jump is because we want to sharpen our financial skills.
We want to learn how to live within a set budget for each category of our spending and amortize our costs over the year. October through December is an expensive time for us for eating out and gift giving. We made it work last fall by saving a little less those months. This year we want to use a monthly budget with roll over to accommodate those expenses.
Moving from a reverse budget to a categorized monthly budget with roll-over.
We know our transportation spending for last year was £1100/$1600. That includes bus, cabs and passes for the trains and horse tram. So we have set budget of £100 a month and are allowing the unused budget to roll-over each month. This will allow us to accommodate months with bigger expenses such as when we take cabs to the airport or purchase annual passes.
Smart Budget vs. Home Budget
To make this change we had to switch our budgeting apps.
Previously we were using Smart Budget. This is a great app if you want to start tracking expenses and you need to sync the app from multiple devices. Good for people with joint finances that want to easily get a snapshot of their expenses and spending.
Why did we switch? Smart Budget doesn’t allow you to set expense limits and it doesn’t easily allow you to put expenses against multiple accounts. We tried it out for a month with our new system and it not only took a lot more time to enter expenses but we had to do some out of app bookkeeping to reconcile our budget and accounts.
Enter Home Budget. Home Budget, while not perfect, is allowing us to set category spending targets, have roll-over budget per category and easily assign expenses against financial accounts and categories. It also does some fun financial forecasting and has the all important Family Sync function for multiple accounts.
If you’re a financial software user yourself you might wonder why we aren’t using something that connects to our bank account and downloads transactions for us. We like entering our spending. The act of entering it helps us stay focused and resist purchases we don’t need. It keeps us honest.
Someday we might move to a system that downloads transactions from our bank accounts but as we have learned over the last three years: we’ll need the skills first.
A change is as good as a rest for finances too.
After a month using this new budgeting and tracking system we’re happy with the change. It’s challenging us a bit, for sure, but it’s also motivated us. I am feeling more resolve, even with a new baby at home, to defrost something from the freezer for dinner rather than call for take-out. And when we had multiple birthday parties to buy presents for this month I didn’t bat an eye at the cost because our gift budget is very healthy.
Photo Credit: Alan Cleaver
Have you ever changed your budgeting or financial system? Why? Was it an easy change to make or did you struggle?