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Cash Tip 2 from Cam: Start a Budget

January 30, 2007

If you have read my blogs for a while, you might remember me talking about my budget and how super-cool it is. However, I didn’t just randomly come to the conclusion that I needed a budget. The realization came a little more drastically.

To begin, from about as long as I can remember, I have known the concepts of budgeting. In 7th or 8th grade, my dad, who is an accountant, sat me down and set up a budget for me in the spreadsheet part of Microsoft Works. It was pretty simple, and it was designed to help me save before spending. The problem was that with only $30 or so dollars a month, after I had split it between the 8 categories, the balances were so small that I didn’t really have the motivation to save for 6 months of time just to get the latest computer component that was really cool when I could use one or two months of savings to get it.

Needless to say, that budget fell pretty flat, and pretty fast, but with the apparent failure, I learned two things, one that helped me incredibly over the course of my school life, and another that has helped me incredibly over the course of my post-college life.

The first was how to use a spreadsheet. After learning the concepts, all my high school classes on office software were a breeze, and my college class meant to teach me the same set of skills I tested out of.

The second was the concepts of budgeting. When I graduated, I had no idea where I was going to work. I was renting an apartment with a friend from college and I knew how to get the money to cover my portion of the rent, but after that I was clueless. I dropped a line to a few relatives of mine who worked in the field I was pursuing (Graphic Design), and one of them offered me a job. So I moved out of my summer apartment and in with one of my aunts and uncles who agreed to let me stay for free with them.

If I had been smart, I would have started my budget immediately after the move, but I didn’t. At that time, my student loans were my only debt, and so I didn’t think I would need one. Looking back, I bet I could have slashed a few thousand dollars more onto repaying the debt than I did, and it would have also prevented the two events that lead me to realize I needed a budget even more. I had the ideal debt slashing scenario and I was too naive to work it as intensely as I should have.

The first of the two budget-prompting events happened about eight months later and it came when I was looking to rent an apartment. My aunt and uncle were moving away and they had found a buyer for their house (and it was pretty much a given that I couldn’t free-load off of the new owner). At the time I was pretty much using my memory of how much was in my bank account and the balance shown on my monthly statements and cash withdrawal stubs to track my money and where it was to go. However during the first month, I forgot about the checks I had written to get into the apartment (namely ones to the tune of about $800) and so when I went to withdraw money (after making some other frivolous purchases), I was shocked at how low my account had gone. It hadn’t gone over-drawn but it was a lot closer than I would have liked it to be.

The second came a few weeks later when I was traveling back from Nebraska after spending Thanksgiving with my family. The weather was horrible for a good chunk of the trip, with whiteout conditions for close to half of it, but it wasn’t until after the storm when I was in the nice clear, sunny and “mildly” gusty portion that caught me off guard. A gust of wind and a patch of black ice, coupled with me changing lanes while going a little over the posted speed limit, took and spun my car off the road. I didn’t have AAA and so I basically was ripped off for the towing and tire repair. It cost me enough to put me into the red with my bank and it was the final straw that convinced me that I would start a budget and I set a date goal for having a budget in place — Jan. 1.

Budgeting isn’t evil. It doesn’t even have to be as complicated as I have made mine to be. (My budget didn’t start out very complex.) It is simply having something written (whether on paper or on computer) that tracks the money that is coming in and the money going out of your account. It also keeps track of where different amounts of your money should be going –like taking a certain dollar amount and reserving it for the rent or mortgage payment.

If you have excel and/or are interested, I can demo what I have set myself up so you can see how it works, and if you like it, I can work with you to set something up for you. There are many tools available to help you take control of your money, and if you haven’t already built a budgeting system for yourself, I suggest looking into it. It just might surprise you to know how your money is being spent.

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