Budgeting is one of those tedious chores avoided by people of all types all over the world. We know, it’s tedious! But, with the internet access we all have now from our phones, our laptops, and even our neighborhood McDonald’s, there’s really no excuse anymore to avoid it. Automated software can do most of the legwork for us!
Especially with a trucker’s lifestyle – constantly on the road, making transactions at different shops and stations and restaurants all over the country, it can be vital to keep a tab on your finances and make sure you’re only spending as much as you need to.
So, getting started is really going to be the hardest bit. That’s why we’ve decided to walk you through the easiest ways to create a simple, complete budget for yourself so you can start watching those pennies. We’ll be using Mint.com as an example, a free budgeting site that imports all transaction details directly from banks, credit cards, and even bill collectors, but you are free to use any of the free systems out there on Google that you find most compatible to your tastes. Just make sure you do your research before divulging account info.
If you’re extra squeamish about using the net for this information, just pop everything into Excel. This will require more legwork on your part since transactions won’t be automatically imported and cataloged.
Mint is a secure site, vouched for by a multitude of agencies, so if you’re concerned about personal information security, it might be a good one to try. Let’s get started.
Step One: Observe
The first and most important thing to do when you decide you’re going to take control of your finances is to become aware of how you already spend. Too many of us know there’s money in our accounts on Friday and next to nothing on the following Thursday, but for the life of us can’t tell you where that money went.
We had a friend use Mint to track spending for the Month of May (which obviously isn’t over yet). She can access this pie chart to review where exactly her money is going. As you can see, the bulk of it goes to home expenses, which should be the largest expense for most people.
This chart is automatically generated by Mint which recognizes most of the withdrawals from her debit and credit cards and puts them into categories.
You might realize with horror that you’ve spent 20% of your income on nothing but bottles of water and bags of chips. The point of this stage is awareness. Your habits won’t change overnight but you need to be aware of them.
Step Two: Allocate
The current most commonly used budget ratio is Elizabeth Warren’s famous 50/30/20 rule. Simply put, this rule cuts your gross income into three categories by percentage.
So if you make $100 per month, $50 should go toward those things you absolutely need. Your mortgage, your groceries, your fuel, etc. The $30 should go toward things you want. Gadgets, takeout, a ticket to a ballgame, etc. And that final $20 would ideally be tucked away into savings for a rainy day or debt repayment if you are holding debt.
Obviously, this ratio assumes that your income covers necessities at the 50% mark. If that’s not the case, you will need to adjust accordingly.
For the first month or two, it may be easiest to split your budget into three broad categories: needs, wants, and savings. This really comes down to personality. If you are more detail oriented, you can skip to the next step.
Step Three: Specified Budgets
Creating specified budget categories will come down to you and where you see yourself spending in the upcoming month. To the right is an example of the specified budget our friend kept for the month of May. We do not recommend allocating every cent of your expected income. It’s important to leave wiggle room for the unexpected.
Do not attempt to massively reduce the amount of spending you tracked from your observation stage. If anything, use those numbers as a guide and just attempt not to go over them in the coming month.
If you set unrealistic goals for yourself or attempt to restrict your spending too harshly out of the gate, you are less likely to stick with it.
Step Four: Maintenance
This will take work. Spending habits are an automatic thing and you will find that it takes longer than you maybe anticipated to avoid overspending in areas that aren’t fixed.
Keeping a record of your budget will make it possible to pull reports comparing your spending to that of the previous month or year so you may monitor the changes your expenses go through and the progress you are making in keeping your spending to a minimum.
Stick to your debit card for purchases. If you are constantly pulling cash out, you will quickly forget where you’ve been spending it and on what. Your debit card will create a bank statement that you can pull online to see exactly where each dollar went.
For more information on personal finance and keeping a budget for yourself, check out Get Rich Slowly and The Simple Dollar. If you have a system that you’d like to share, please leave it in the comments. Best of luck!