This week I’m excited to have my very first guest post – Why I Love Budgeting & How its Changed My Life. Rachel is the creative behind Money Hacking Mama. She is passionate about sharing money hacks for savvy mamas. As a mama on the path to financial independence Rachel has a lot to share. By making a few simple changes to her finances she was able to grow her net worth by nearly $500,000 in less than 5 years.
As this is a guest post I will let Rachel take over in telling her story in her own words:
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Why I Love Budgeting and How its Changed My Life
I love budgeting!
You’re probably rolling your eyes and thinking I’m a crazy person right now and that’s ok, but let me share with you how budgeting has changed my life and then you might understand why I love budgeting so much.
The Starting Point
In 2015, I was wondering where all my money was going every month. I was fortunate to not be in debt, but I wasn’t saving money either. I was living paycheck to paycheck and I was slowly depleting the small amount of money I had set aside previously.
One day, after having enough, I set the goal to get to the bottom of what was going on. I got a pen and paper out and started recording my expenses. I started by writing down the amounts I knew or could easily estimate. For example, I knew how much we spent on our mortgage and car payments every month.
Related Post: FMS – Part 3 – Creating a Budget in 5 Easy Steps
Then, I guesstimated how much our variable expenses were monthly. Finally, I looked at my credit card and checking accounts to see if my guesstimates were right.
Ha! They were so below what we actually spent it was ridiculous. But it felt good for part of the mystery to be solved. We were spending more than we thought on various categories each month and this was part of the reason we weren’t saving.
Catching “Sneaky Expenses”
Next, I thought about the yearly expenses and that was another eye opener! Every month something came up to make us spend more than we had coming in!
Birthdays, weddings, holidays, car insurance that I only paid twice a year, all these things added up over the year and caught us off guard. But they shouldn’t have because most of them were predictable! They happen every single year like clockwork.
When I added these up and divided them by 12 I was spending more every month than I had coming in! It was a wonder we hadn’t gone into debt.
At this time, I didn’t have a goal other than getting my spending under control and not going into debt. So, I reviewed where my money was going once I had it all laid out in front of me and I started to reduce the amount I spent in categories that weren’t important to me.
Related Post: How to Save Money on Groceries – 15 Best Tips
I started conversations with my husband like “do we really need cable?” After determining $100 per month for cable was silly when he only used it to watch football a few months out of the year we decided to cut it and get a $25 antenna from Amazon instead.
The Power of Negotiating
I also called companies and negotiated. We changed our car insurance company and saved a few hundred dollars. I signed up for a money savings program through my electricity provider and saved a ton on our monthly electricity bill.
We went through each category and asked ourselves, “do we need this?”, “can this expense be reduced?”, and “Is there a creative solution to reducing this amount?”.
I even questioned how much we had coming in and asked hard questions about those numbers. Questions like: “am I happy with my current job?”, “do I feel I’m getting paid what I’m worth?” and “Do I feel that there’s adequate growth potential at my current job?”
I realized some hard truths when asking these questions and I then started looking for new jobs. Within a few months I found one that paid over $15,000 more than I got paid before. Talk about a budget reliever!
We Didn’t Create a Life of Deprivation
One thing I want to make clear is that while we were reducing a lot of categories, we kept some the same or even added money to them. For example, we love to travel and we enjoy the experience of eating out.
Related Post: Monthly Money Mistake – July 2019
Because we cut mercilessly in areas that weren’t important to us, we were able to spend lavishly on other categories. This is a vital part of creating a budget that you love and that you can stick to.
It’s not about depriving yourself, it’s about making conscious decisions in alignment with your values and goals.
All of these simple actions helped me get a handle on my finances and helped me build a strong financial foundation. Then, a year later I learned about the financial independence, retire early community and I got a $20,000 raise!
Creating Big Financial Goals
Inspired by people who retired at early ages and saved a lot of money quickly, my husband and I had a great conversation about our financial goals and what we wanted to achieve. Then, we reviewed our budget again and were able to make more adjustments because we had this big goal of early retirement motivating us.
Related Post: FMS – Part 2 – Goal Setting
After figuring out how much money we needed to save to retire early, we started tracking all of our accounts in YNAB (You Need a Budget budgeting software). This allowed us to get a clear picture of our net worth on a day to day basis.
Then, when we put money into a retirement account, rather than feeling like it was gone forever we now saw it in our account and we saw how it contributed to our net worth number going up which meant we were that much closer to our early retirement goal number.
Related Post: FMS – Part 1 – Net Worth Statement
How Budgeting Changed My Life
Tracking my net worth, coming up with goals, and creating a budget may sound overly simplistic, but these steps have literally helped me and my husband grow our net worth by nearly $500,000 in less than 5 years!
That is how budgeting changed my life. That is why I love budgeting so much. If you want to get your financial house in order, I highly recommend you read the Foundational Money Series and more importantly, take action on the recommended steps. I promise you, you’ll be glad you did.
How has budgeting changed your life?