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For the longest time, my wife and I didn’t feel the need for a budget. But over the past year, for whatever reason, we’ve started looking into our spending. We were surprised by what we found — and why budgeting became important to us.
Often times, people budget because they want to stop living paycheck to paycheck, or they want to save up for something big. But what I’ve found is that budgeting is just as important if you want to avoid one of the most dangerous pitfalls of life today: hedonic adaptation.
In short, my wife and I found out that we were eating out more and spending more on little trips to the store than we had been at any other point in time. Did these trips make us happier? Sometimes — it was nice to not be forced into cooking dinner — but often we were missing out on opportunities to spend time together as a family.
Here’s the 60-minute guide to budgeting that helped us. It will hopefully help you, too.
Step 1: Break down your monthly spending (30 minutes)
First, my wife and I sat down and pulled up all of the accounts we usually pay for things with. This included credit cards, debit cards, checking accounts, and savings accounts. Then we went over our spending for the past three months and broke them all down into categories. While yours might be different, ours included:
- Rent/Mortgage and Utilities (including phone plans)
- Anything transportation related (including car insurance)
- Other types of insurance (health, dental, life, etc.)
- Food (both groceries and eating out)
- Entertainment & Travel
- Loans
- ATM withdrawals
- Miscellaneous
If you’re both working together, and you have all of the information pulled up in front of you, you might be surprised by how quickly you can do this. It’s a vital step, because without it, you have no idea where your money is really going every month.
Step 2: Read the following excerpts (5 minutes)
I’ve been lucky enough to be exposed to a wide variety of people in my life. One thing I believe in my heart thanks to these experiences is that money is only very weakly related to happiness. I think it is only beneficial to contentedness insomuch as it can be used as a tool to meet the most basic needs. After that, other factors are more important.
But don’t my word for it: Take the next five minutes to see what professionals have already found out:
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