This past week Lori and I started focusing and working against a budget for the month, to make sure we save where we want to save and take care of items around the house that need to be done.
This morning I was thinking about how excellent a process this is for anyone in the software development world that has to work on projects with budgets and schedules, which is everyone I know. Roles, such as Project Managers, live in this space already and are quite familiar with it. Others in user experience, design, development, testing, etc. don’t necessarily do this for software projects. We know that it’s happening, that we have to factor into the project budgets, and we speak to it with phrases like “obviously, if you take from one part of the budget you have to make up for it somewhere else.” More commonly we talk this way about requirements for a project, which are just another form of budget: “obviously, if you add in these new requirements you have to make up for it somewhere else by removing requirements” (or change you goals; i.e. the launch date).
If you don’t actively work with budgets as part of your job, then you should try out managing a personal budget of your own and experience how hard it can really be.
Only one week in, we’ve experienced unplanned expenses slipping into the budge, and planned expenses that then weren’t necessary (A dental visit that cost less than we estimated). In these situations we had to either take money from somewhere else in the budget, or reallocate the money for the expense that we were no longer going to incur. If you don’t keep working with the budget throughout the month, it will lose value in your mind and you may just give up on it figuring “I’m OK, the budget said we were fine this month!” I’ve made this mistake and what happens in the end is that you spend in places you didn’t intend to spend and you end up moving further and further from your real goals.
The budgeting method I like to use for personal finance is the zero-based budget, where you account for every dollar of income and spend it on “paper” in advance. This is the only way I have ever thought budgeting was done, I’ve never really tried another method and I don’t seen any reason to do so.
Here’s some linkage for your personal edification:
Finally, here’s a template I use for budgeting via Google Docs (something I nabbed a long time ago from an Excel spreadsheet):