September 28, 2009, 5:00 am

Going Back to the Basics of Personal Finance; Making a Budget for a Single Income Household

by: The Financial Blogger    Category: Personal Finance
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For those who read The Financial Blogger on a steady basis, you have seen a lot of changes in my life in 2009. My wife quit her job, I finished my MBA and I reduced my work week to 4 days while investing more effort in my web company. During this turbulent period, I had given up on Microsoft Money and drifted away from my budget. So, it’s been almost a year that I have been operating without a budget and surfing on the hopes of a big fat bonus and dividends from my company to make sure my net worth increases by the end of the year. Not exactly what I am used to.

I had previously been able to master my tendency to procrastinate and kept my budget up-to-date for 3 years using Microsoft Money. The official date that I stopped was November 2008. This is when I started basement renovations. Money was flying out the window and I had decided to “let go”.

How can I manage a single income household without a budget?

It is actually a big mistake to think you can handle the family’s personal finances just by running quick numbers in your head and thinking wishfully.

Back in May 09, I ran a few numbers to ensure that my cash would hold out until the end of the year. I knew I had to use a few thousand from the line of credit at times and I was ok with that as long as I was able clear all the debt with my year end bonus. ;-D I know we’re all right with a single income but I do not feel under control at all. 8-(

There is something I have noticed; we didn’t slow down our lifestyle by one cent. This is what we call in French; “l’effet de cliquet”. This means that you can easily improve your lifestyle but it is almost impossible to go back voluntary. Simply put: we have a one way ticket when talking about money. So, if you think that you will cut down on vacations, dining out or other discretionary expenses because you have less income; bad news awaits: it is going to be really hard (read painful) to spend less than you had been accustomed to enjoying.

The problem is not really the making a budget for single income family. I can actually use the cost of living approach (take a look at my different types of budgets), use online software like You Need A Budget (YNAB) or even use Gather Little by Little’s Budget spreadsheet designed by the former owner. I really don’t have a concern about the tools available to make a solid budget and manage a single income household. My problem is elsewhere. It comes with procrastination!

While making a budget is not complicated, sticking to it is definitely a challenge! In order to do so, the only way I found success was to track down every single penny escaping my wallet through The Power of the Purse. This is why I desperately need to go back to Microsoft Money and regain my former discipline.

I dream of the day that I won’t have to worry about being the only income in the family because I am making way more than my actual cost of living! In the meantime, I will have to sit down each day and key all the required information into the software.

By writing down your expenses, you realize how far your wallet can go without you having to scrutinize it. A wallet is like a 4 year old child; he can run 3 times around the block before you notice he’s gone! So starting October 1st, I am taking back control my personal finances!!!

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