I promised I'd share the #1 thing that was vital for us to pay off our debt. It's the B word...
I can't imagine not living on a budget. Most of what we've learned about budgeting we've learned either from Dave Ramsey or Crown Financial Ministries. We've always TRIED to live on a budget since we were first married. And we made lots of mistakes, especially early on.
Our 3 big mistakes:
A general, vague budget: not looking specifically at what income was actually going to come in that month and what expenses were actually there. We would just use general percentages of what our money "should" go to...and then wonder why we'd be way over in one category and way under in another. We weren't adequately gauging what we really needed in different categories. We never fought much about money since we had a shared goal, but the disagreements usually had to do with being off in certain categories which was actually generally due to poor budget planning and not overspending.
Not budgeting enough in key areas, especially GROCERIES. I primarily do the grocery shopping and for a long, long, long time I always thought I could do it on a ridiculously low amount, then be frustrated that we went over. It was almost always our budget buster, and not because I went crazy in the candy aisle, but because we weren't budgeting enough for the things we needed. Clothing is the other area we often underbudgeted (people are going to need new underwear, it's just a fact).
Being surprised by expenses that were no surprise. Guess what? Christmas comes in December every year. We usually want to take a vacation to see the family in the summer. The car will need new tires. Early on we didn't budget for these things. When we got better at budgeting in 2007 we started creating "sinking funds". We'd put money in our savings earmarked for things that came around once a year (or more): car repairs, Christmas, vacation, car license plates. Once we mastered this, very few would have have "surprises" that set us back.
Budgeting is trial and error. If you've never done it before and you are going to start, be prepared that the first few months may be rough. It may cause some "discussion" in your relationship. But when you plan on where you money is going and follow through, it can have some big benefits.
Our big 3 benefits:
It brought us unity. We had a goal we were mutually working on (and recently included the kids). We spent the first of the month sitting down and looking at income and expenses. We were unified in purpose. Now, I'm not saying every "budget meeting" was pleasant. We had disagreements. But in the end we'd compromise, look at the end goal, and agree on what we needed to do. This was the first month EVER since we've been married that our goal wasn't to pay off debt with any extra income. It was strange. Before we sat down it felt like we were going to have a ton of money to just spend. But we set some savings goals that we agreed on. It will help us stay unified and not become consumer driven.
It brought us freedom. Freedom? Finding out you can only spend $x.00 on clothing brings freedom? Absolutely. Okay, at first it feels restrictive, especially if certain budget areas are low. For most of our journey things like clothing and entertainment have been very low. But there was a freedom in knowing how much I had saved up to spend (usually in my cash envelope) when going shopping with a friend. I didn't have to justify it, that was the money for clothing.
It ultimately brought us to our goal. If we hadn't budgeted we never would have known how much extra we had to put on debt. We wouldn't have known where we could cut costs. Some months we may have made too big of a debt payment, not remembering that we had to buy license plates. Our budget was our monthly road map...and kept us from driving off a cliff!
Dave Ramsey and Crown Financial both have great tools to help you in setting up a budget. They both have forms and some online tools. We're both computer type folks so we used (and continue to use) a spreadsheet to track our budget, but pen and paper or computer programs can work as well. Whether single or married, taking the time to do a budget on a consistent basis is the best thing you can do for your financial future.