Want a better budget? Best be brutally honest.
In just eight months, we've paid off a department store credit card and put ourselves on track to be completely free of consumer debt in just a handful more months. We've also paid cash for a major car repair and started saving for things that are important to us. But changing our finances required more than an Excel spreadsheet and a grand idea.
Setting up a successful budget has demanded two skills time and time again: 1. An exceptional level of honesty, and 2. An unflinching ability to stare the facts in the eye. Below are four ways that honesty was essential to aggressively paying down debt these last eight months.
1. Where is our money going?
When I set out to change my personal spending habits, I knew that I first had to delve into the truth about the choices I was currently making with my money. Although it was terrifying, tallying up three months of all my expenses was ultimately empowering. Once I knew what my spending looked like, I could identify exactly what I wanted to change. Taking this step convinced me: True financial honesty is the strongest weapon we have in creating and sticking to a successful budget.
2. What are our true priorities?
Weekend trips have been a way of life for us. We greatly enjoy exploring the Pacific Northwest and taking short trips to see friends/family on the other side of the Cascade Mountains. When we made changes to start aggressively paying down our debt, we found ourselves scrambling to cover the costs of our occasional weekend trips.
We might like the idea of forgoing small adventures in order to pay off debt and save money more quickly... but that's not who we are. We are happy to drive 10-year old cars, scrimp on the costs of clothing, eat at home, skip lattes, find free parking, reduce our grocery budget, quit the gym, and be content with our well-worn household items. However, weekend trips to see beautiful or curious places are one thing we don't want to sacrifice. While we are committed to postponing major travel plans until all our of consumer debt is paid off (and until we can pay for those trips with cash!), local weekend trips are an essential part of our enjoyment of life.
By being honest with ourselves that our weekend adventures are here to stay, we can plan ahead to pay cash for them instead and ensure that we don't accrue any new credit card debt when taking an occasional road trip. Realizations like this have helped us build a stronger and more accurate budget over time.
3. The intimacies of a household budget.
Yes, budgets are sexy. And talking about our budget and our spending has been intimate. Very, very intimate.
These conversations were so hard at first! My husband and I each came with our own unexplored expectations and anxiety around money-related issues, and it was hard to overcome those things to talk about money without our palms getting all clammy. With practice, it has become much easier to talk about our debt, the financial impact of our choices (we really, really, really wanted those Kendrick Lamar tickets, but... ouch!), and what we want for the future without feeling quite so awkward or guilty.
This openness and honesty has paid off in a big way. We are moving together toward our mutual goals, and there is way less hesitation when we need to discuss a money-related topic.
4. How can we do it better?
Being able to openly admit mistakes without throwing up an impenetrable defense, beating ourselves up, or shirking off accountability has kept us moving in the direction of our goals. As we continue to learn more about personal finance, there are things I wish I'd done differently. I wish we had started putting money into and IRA last year, and I wish we'd looked more closely at our student loans when setting up our income-based repayment plans.
If I burdened myself with guilt when I realized my missteps, the weight of that guilt would be one more barrier I'd have to overcome before I could start fixing my mistakes. All human beings are imperfect. Being able to openly acknowledge my missteps without being overly critical has made it easier to constantly refine and improve the way that our finances are managed. (And I'll be sharing more about how I corrected our course soon!)
By being brutally honest, we're building a better budget.
Our budget wasn't perfect when we started this process. It's still not perfect now, but the more open we can be about our limitations, opportunities, and priorities, the more we can continue to improve.