And yes, we look at it and compare our spending.
Having a budget doesn't really matter if you never look at it, its not adjusted regularly, or it doesn't match your lifestyle. Here are some basic ways to make budgeting work for you.
Make It Easy. We like to use Quicken software for managing our budget. It is easy to set up, easy to download credit card transactions, and easy to make adjustments. If it is not easy to do, you know you aren't going to stick with it. So start easy, you can always make your budget more complicated later.
Start Right Now. The great thing about a budget is that you can begin immediately. Don't wait for debts to get paid off, the new year, or life to get easier. As you start tracking your spending, you will see patterns. The more information you have, the better.
Make it Flexible. As you notice patterns, it is okay to change your budget. If it doesn't fit your life, you know you won't stick to it.
Review it Regularly. It is good to watch for categories that are out of whack. Sometimes it will have too much money allocated, and sometimes it may not have enough. Know this before it is too late.
Build in a Cushion. Allow for spending to fluctuate each month. Add a small percentage more to each category to allow for any extras. At the end of the year, you can always use that surplus to buy something special or give it away.
Prepare for Long Term Savings Categories. Putting a little bit in a category, like new car, each month will let you afford things before you need them. This way you can track how much you have saved up for an item.
Have some Blow Money. This comes from Dave Ramsey. Everybody needs to have a bit of cash that they can just spend as frivolously as they want. You don't have to track it and you don't have to defend it. You don't even have to spend it.
Miscellaneous Category. This is great for those times when you need something that really doesn't fit into any other category. Like an umbrella. You don't really need an umbrella category, but its not food, or clothes or gas.
Combine Categories. We buy diapers, shampoo, and Dog food at the grocery story. It seems silly for those to have their own category, so we just lump them together in a single grocery category.
Separate Categories. We knew we could cut some money by not eating out, but we wanted to know how much. So we put eating out into the entertainment category instead of a food category. Now we know how much is left for when date night comes along.
Your Budget means Freedom. When you are trying to save money, it is easy to get into a rut of being a tightwad. But having a budget means saying yes to buying what you need and even want, saying no to what you can't afford, and knowing the difference.
Having a budget has meant peace of mind for our family. We have a zero balance budget, which means we write down how much our income is, and subtract all of our expenses until we get to zero. Using a computer program helps us play with the numbers easily so that we can add or subtract here or there to make it work. Because we have a budget, we can prove that it is possible. We know how much we can spend on each thing, and we DON"T HAVE TO WORRY!
Not having to worry about money is the number one thing that makes us feel rich. You don't have to make a lot of money to know that you have enough.
Your kids will learn about how budgeting works by seeing that the family has one and follows it.