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How The Two Unbreakable Rules of Budgeting Will Change Your Life:

I’m a bit of a nerd, I love creating Excel spreadsheets and organizing my finances with Quicken. You might even go so far as to say I’m a bit obsessed with the rules of personal finance.

I even go so far as to live on a budget and follow budgeting rules. Yes, the dreaded “B” word.

Budgeting allows me to tell my money where to go rather than letting my spending control me.

I have such a hard time understanding why so many people cringe when they hear the word budget. For me following the rules of budgeting is freeing.

Ultimately budgeting rules isn’t supposed to be about limitations, they are about learning to control your spending based on your actual income.

How I learned the rules of budgeting

I learned budget rules from my parents. Not so much by what they said, but by their example.

Arizona Strip Branding

My Dad showing off his roping skills

My parents are cattle ranchers.

A ranchers goal is to sell his cattle in the fall when they have had enough time to bulk up from the summer. The more an animal weights, the more it is worth.

If you sell an animal during the winter it is naturally leaner and will sell for less.

Ideally, this means a rancher will sell his cattle once a year . . . . which means he gets paid once a year.

Crazy huh, yes they would occasionally sell some cattle in the spring, but even then that means a semi-annual income.

When your main source of income comes in once or twice a year, budgeting isn’t an option, it is a way of life.

My parents are the ultimate budgeters. They are very meticulous about their spending and watch every single penny. They know exactly how much money they have to spend each month and they stick to the rules of budgeting.

My budgeting skills aren’t even close to my parents. I incorporate a lot of wiggle room into my budget rules and may occasionally fudge in one direction or another.

However, my budgeting has two simple, unbreakable rules.

Budget Rule 1:  Pay yourself first.

I’m LDS, so for me, this is done in two ways. I always pay 10% tithing to my church.

Even if you aren’t a religious person I highly recommend giving a portion of your income to some form of charity.  In my opinion, the amount doesn’t matter.  There is something about looking beyond yourself and helping others that will change your attitude about money.

When you consistently give to others, you’ll find that you become less and less attached to your money.

My second step is to put a set percentage of my income towards my three forms of savings.

I have to adjust my savings percentages periodically based on our current financial situation.  You may choose to set a different budgeting rule.

For example, when we were trying to pay off our consumer debt, I chose to stop funding our retirement accounts for a couple of years.  It was a very difficult decision, but I felt that reducing the debt was more important.  You can read more about our experience in this post:  How We Paid Off $293,000 of Debt in 5 Years.

Our emergency fund is currently at 6 months, but until we hit that point I threw every extra dollar towards that goal. I currently contribute at least 10% to retirement and usually do $500-1,000 towards the personal financial goals.

It is really hard to live within the rules of budgeting and save money at times.

However, I think it is even harder to have an emergency and not have money.  I hated the feeling of not having money and have never been able to live paycheck to paycheck. One of the number one personal finances rules is to always have a financial reserve.  The thought of not having a reserve freaks me out.

Budget Rule 2:  Never Spend More Than You Make

In my first marriage, my husband and I had slightly different views on spending. He just had more expensive tastes than I did and I didn’t know how to say no. More than anything we were just young and dumb.

Our spending was never exorbitant, but as college students living mainly off student loans, it wasn’t sustainable.

After our divorce, we split the $858 in credit card debt we had accumulated. I know, $858 is virtually nothing when it comes to credit cards, but for me, it felt like the end of the world.  This was back in 2001 and as a recent college graduate, I had no money.  It was such a scary time for me and left me with a very healthy fear of credit card debt.

I made a commitment to myself that I would never carry a credit card balance or live outside my means again.

Beyond some work reimbursements where they covered the interest, I’ve held to this commitment.

Keeping your spending at reasonable levels is where the rules of budgeting start.

  • Without a plan, you will overspend.
  • Without a plan, you will waste money.
  • Without a plan, you are directionless.

However, when you learn to control your spending your financial life will become significantly easier.  I’ve found that as I learned to assess my spending and really focus on spending on my needs, rather than my wants, it became significantly easier to follow my budgeting rules.

I also spent a lot of time decreasing my spending leaks so that the money I had was used wisely.  When you really take a deep dive into your personal finances you’ll often be surprised at how much money you are wasting on random stuff.

Related Posts:

Why The Two Unbreakable Rules of Budgeting Are So Important

I’ve been budgeting and trying to manage my finances effectively for a long time.  I’ve made some really stupid mistakes and done a few things right over the years.  What I’ve found is that if I focus on following correct budgeting rules by living within my means and paying myself first I always come out ahead.

The two simple rules of budgeting have been life-changing for me!

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Some months paying myself first literally meant $20 and I barely paying all the bills, definitely no room for extras.  Those months were hard, but by sticking to my budget and constantly focusing on debt reduction I’m on the other side now.

The other side isn’t perfect either, but not having to watch every penny and actually being able to put a decent amount of money in retirement is an amazing feeling.  I know that at times, controlling your spending sucks.  I also know that in the long run, it is worth it.

If you can follow these two simple rules of personal finance you will completely change your personal financial picture for the better!

You can do hard things.





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