My Awesome Nephew

A little early for a Christmas picture, isn’t it?

Well, that’s actually the point today.

Last week I wrote about Budgeting for Expected Costs, and my little sister (who, on a side note, is a thrift store ninja master) brought up that the holidays are a perfect example.

Most of us are planning on spending at least some money for the holidays. (Wordy debates of how right or wrong this is can be found all over the internet if you want to join one.)

Now is a great opportunity to start building funds in your budget for trips back home, gifts, parties, home-made-gift materials, ugly sweaters, Pink Nightmares – anything you and your family might do to celebrate in your own way.

You can make categories – as general as one big “Christmas” category, or as many specific categories as you might want – and fund them as money comes in, or move funds in them from less important categories for a while. The more funded they are, the less inclined you might be to go beyond your means this year – and the less guilty you’ll feel when you find the perfect gift.

How do you use your budget when the holidays start?

Photo by: picsbycam

Once upon a time…

A woman and her husband discovered their favorite band (ever!) was in town. It was a chart-topping-mainstream-band so they charged quite a bit for their concerts.

The couple spent a long time thinking hard about the cost of the concert, debating the pros and cons, and worrying about what it would mean for their bills this month if they went. In the end they went and paid a decent chunk of money and felt guilty (and a little tired), but still had some fun.

In the same town…

Another woman and her husband wanted to go see the same band, but they followed a budget.

They looked at their budget and in less than a minute decided they could afford to go. Their “Fun” category didn’t quite have enough to cover the entire evening (they hadn’t planned on the band being in town), so they moved some funds from something they valued less than the concert (a small but growing “new couch” fund). So they went and paid a decent chunk of money, and had a great time, created a memory together – and didn’t feel guilty or worried at all.

And they rocked happily ever after.

The End

Photo by: paalb

Yes, half of budgeting is tracking your spending. I know, it’s not very sexy, but at least it only takes about 2 minutes a week.

Knowing where you are spending your 95% is powerful information for finding leaks in your paychecks, adjusting future budgets, and evaluating what you value. But tracking the money you’ve spent is only half of your budget.

The other half is just as important: how much money do you have left, and what is it set aside for?

Is it where you want it?

This is the half that helps you makes sure your needs are being met, that you’re living within your means, and that you have enough to enjoy your life.

If you’re keeping things loose and flexible, you can easily do a lot with what’s left of your personal budget this month. Take a look at it really quick. Are you happy with what’s left in each category, or do you need more money for, say, food this month? If so, where will that money come from? Fun? Books?

Move some funds around if you think you should. It’s your budget.

Did you spend less on gas than you thought? Should you move some of that extra money towards short-term savings, or would you rather put some extra cash towards a fun weekend?

As long as you have enough left in your “needs” to make sure you’re good, the rest can go anywhere you think it should.