Archives For Budgeting

Budgeting for Couples and Common Money Fights

Brent Pittman —  01/12/2012 — 4 Comments

 

Do you fight over pennies with your spouse?

If you’ve been married longer than 1 minutes, you’ll realize that your significant other views money differently.

You like to pick pennies off the ground and your spouse doesn’t even notice them. We use our money on what we value.

When your values are being violated you stand up for them, especially when the topic is money. A fight over money ensues.

Common Money Fights

  • Saver Versus Spender- When a saver doesn’t get to save, their sense of security is threatened. When a spender doesn’t get to spend their sense of freedom is endanger.
  • Mistrust- This can result in many forms and sometimes for good reason. Trust has been previously broken. When mistrust is present, suspicion, micromanaging, and control issues arise. This is not a happy relationships for either party.
  • Stress and Anxiety- When money is tight and bills are due, paying bills can get a little eh…tense. Have you been there? Also, many of your fights will occur when you are hungary, angry, lonely, or tired (H.A.L.T)
  • One Horse is Faster than the Other- When one of you is onboard the budgeting train and the other is left at the station disharmony will ensue. The spouse not onboard will fight and sabotage the budget (with a smile). The train conductor feels frustrated and alone.
  • “You Bought What?!”-Miscommunication is a huge contributer to money fights. When you don’t talk about decisions surrounding purchases, hurt and more mistrust ensues, especially when you overspend your budget.
  • Control Freak- One spouse just can’t let go control and allow the other make decisions about money. Eventually the controlled will burst or bolt.

Budgeting for Married Couples

1. Get on the Same Page- Communication and agreement about the values behind budgeting and money must occur. If you are having serious money problems you might need marriage counseling from clergy or another professional. Remember money issues are the number #1 reason for divorce, but they are also the #1 opportunity for in your marriage (Larry Burkett)

2. Do a Budget Together- Together is the key word here. See how my wife and I have a budget party each month and learn about budgeting nuts and bolts.

3. Decide Roles and Systems- Who is going to pay the bills each month? Who will track expenses? Where do we put our receipts? Basically decide who is going to do what and when.

Action: Discuss with your spouse any lingering money issues and start working together. 

(Photo by pfala)

[This is part of my How to Budget Like a Pro blog series]

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What Percentage of Income Should I Budget for ________?

Brent Pittman —  01/11/2012 — 2 Comments

Photo by Duncan

Are you weird in your spending? Are you outside the box of normal? How do you know?

It’s generally ok to be spending less than others unless its for savings or retirement. What we worry about is if we’re spending too much money in certain categories. We could all use some budgeting tips right?

Thanks to some smart nerds (have you ever met a dumb nerd) we’ve got charts that show how much you should be budgetting for certain categories. Of course if you’re super rich or live in relative poverty, these percentages will be off.

Keep in mind that if you are a little higher or little lower in certain categories, it’s o.k. Don’t freak out. Take a hard look at your situation and your budget to see if any adjustments need to be made. If you’d like a second opinion, I’d also be happy to take a quick look.

Obviously you can’t spend on the higher % end for all categories or you’ll be in major trouble. It is also recommended that you don’t try to save for retirement and pay off debt at the same time. Focus will have a powerful affect.

Recommended Percentages for Household Spending

Budget Category Percentage
Charitable Giving 10-15%
Savings 10-15%
Retirement 10-15%
Mortgage or Rent 25-35%
Food 5-15%
Utilities 5-10%
Clothing 2-5%
Transportation 10-15%
Health and Medical 5-10%
Recreation 5-10%
Personal Expenses 5-10%
Debt 5-10%
Mad Money 2-5%


Action: Examine at your budget and calculate the percentages you are spending in major categories. Determine  if any adjustments need to be made. Comments are welcome below.

[This is part of my How to Budget Like a Pro blog series]

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A Budget for Artists and Freelancers: Budgeting with an Irregular Income

Brent Pittman —  01/10/2012 — 14 Comments

Artists and freelancers are different. You think differently, sleep differently, and work differently. You live a gig life. Consequently this affects how you are paid and how you can budget.

Getting paid $5,000 for a commercial and not making a penny the next month. Dilemma. How will you pay rent and your SAG membership? What if Google introduces another Panda and your PR dives along with your income?

You’ve got to budget differently if you get paid per project, gig, or work off 100% commission. Keep in mind that budgeting with your unique lifestyle involves a bit of Improv (I love Monkey Butler) and ideally a larger Emergency Fund that those with a predictable income.

How to Budget with an Irregular Income

1. Determine the least amount you’ll make per month- Every month you’ll make at least X amount. This X amount can be budgeted like normal which I wrote about here.  If you’ve got months where you make nothing, you’ll need to find the lowest amount you can live on and have at least that amount in your Emergency Fund.

2. Rank your important expenses- There are certain expenses that have to be paid each month: Rent, Food, Transportation, etc. Rank all your normal expenses from top to bottom in order of importance. When money comes in or you have an amount greater than X from #1 above, start paying from the top of your list and go as far as you can. If you have extra money, put it towards debt or back into your emergency fund. Use this worksheet if you want to use pen and paper.

More Tips for Living with Irregular Income

  • Charitable Giving- If you come from a faith or lifestyle in which giving is important or integral to your spiritual life, then give first. For my family, we give first and then budget the remainder. If I try to give later down the road, then the money may already be spent by mistake.
  •  Taxes- If you are self-employed and/or receive a 1099, set aside enough money to pay your quarterly taxes or put them in a separate account to pay taxes at the end of the year.
  • Emergency Fund- Those of us who live off irregular income need a larger emergency fund. If you had a regular income you’d need $1,000 if you are in debt or 3-6 months of expenses if you’re out of debt. For Irregular Income earners, you’ll want to pad that amount and/or lean towards the higher 6 months-12 months of basic expenses of savings.
  • Give it Time- It may take up to a year to build up your emergency funds and to perfect your budgeting methods within your unique industry. But, hey you don’t do life normal anyway. Otherwise you’d have a boring day job.

How do you live on an irregular income? Do you have any suggestions or tips? Please add them to comments below.

(Photo by The Library of Congress)

[This is part of my How to Budget Like a Pro blog series]

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Budgeting Nuts and Bolts

Brent Pittman —  01/09/2012 — 8 Comments

This is the core post about budgeting. The How to Budget post. I know some of you might have skipped ahead, but don’t forget to do the pre-budgeting activities first.

Budgeting is very simple. You are deciding before the month begins how your money will be spent. Every dollar earned will be assigned to a category.

Side note. If you are in crisis mode i.e. a lost job, about to face foreclosure or bankruptcy, then you are budgeting to survive. Housing, food, utilities, and transportation come before anything else.

You’ll need to decide how to record your budget. Use what works for you: pad and pen, personal finance software, or a basic spreadsheet. Our family uses a basic excel spreadsheet for our budget, so let’s use that as an example.

Determine Your Income

If you completed the pre-budgeting activities or keep track of your spending then you know what you’ve been making and spending.

Time to write down what money is coming in. Everything. Both Regular and Irregular. Yes, even the $100 your grandmother has sent every birthday since your were 5. Budget every dollar. If you know it’s coming in, put it on paper. For those artists and free lancers out there we’ll talk about budgeting with a 100% irregular income later.

Types of Income Regular  Irregular 

(Monthly Take Home)



Income 1 $1,250
Income 2 $1,250
Bonus
$500
Birthday Money
$100
Carry Over Previous Month $100
Self Employment Income $500



Flood Damage Check
$100


TOTAL INCOME $3,100 $700

In our example above we have $3,100 in every month income and $700 in irregular income (meaning it doesn’t happen every month). In total we have a $3,800 family income we can spend on paper.

Budget Your Expenses

It’s time to budget your upcoming expenses for the month. Remember every month will vary, and it will take several months to perfect the budgeting numbers. Don’t be discouraged if your budget doesn’t balance out the first time. It will get easier with practice.

Here is our example of budgeting a $3,800 income.

ITEM Monthly Total Envelope* Total
Charitable Giving 250.00
EMERGENCY SAVINGS
Allocated Savings (Irregular) 250.00
Retirement
School Loan 320.00
Dates 100.00
YMCA 59.00
Car Payment 375.00
Car/Renters Insurance 120.00
Mortgage 850.00
UTILITIES-Electricity 100.00
Household 50.00
Natural Gas 11.00
Laundry* 30.00 30.00
Cell Phone 155.00
Home décor 25.00
Internet 30.00
Groceries 250.00
Make-up 20.00
Postage 40.00
Gifts 75.00
Entertainment 100.00
Gas 120.00
Repairs, Oil change 25.00
CLOTHING* 100.00
Life Insurance 25.00
Flood Damage 100.00
Baby stuff:Diapers, supplies, etc. 50.00
Med Co-Pay/RX/Den/Opt, 50.00
Other I
Other II
Lunch Money* 40.00 40.00
Mad Money* 20.00 20.00
Emergency Cash* 20.00 20.00
Couples Spending* 40.00 40.00

TOTAL 3,800.00 150.00

 Important Points:

  • The total was $3,800 which equaled the expected income. If they had spend more than $3,800, cuts would have to be made.
  • This family didn’t budget for Emergency Savings as they already have an Emergency Fund in place.
  • No contributions to retirement were made as they are trying to get out of debt before they resume their retirement savings.
  • They are using the Envelope System in the categories with * and thus will get $150 out to spend in those categories. I’ll elaborate more in another post.
  • Allocated Savings category is a savings account for annual expenditures they are saving for a little each month. eg. Saving $100 a month for car insurance premiums that are paid every six months. When month six comes along you’ll have that $600 sitting in the bank and won’t be caught by surprise.
Action: Make your first budget. If it doesn’t balance to zero, make cuts or start figuring out how to increase your income.
Comment below if you have questions or suggestions on how to budget successfully. (Photo by Orin Zebest)

[This is part of my How to Budget Like a Pro blog series]

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Pre-Budgeting Activities

Brent Pittman —  01/06/2012 — 3 Comments

Are your finances tangled in knots?

Many of you might not be ready to budget your money yet. In fact, if you do you’ll fail big time. Why?

  • You don’t have the skills, confidence, and support to win.
  • Your spouse really isn’t bought into the idea, they are just going along to avoid another money fight.
  • Your money is such a tangled mess, that you have no idea what’s going on.

Start with these activities if your money in a mess:

1. Track Your Spending on Paper

Track your spending for 30 days to see where your money is going. Don’t just track your debit and credit cards. Track your cash spending also. This will take some pen and paper or your could use something supercool like Evernote.  You’ll be shocked and hopefully motivated to begin budgeting. This might also get your spouse on board when they see the numbers.

I also like to suggest Mint, but this will only show your online spending and you’ll need to configure the categories. This is a great tool if you are tech savvy. Writing it down and entering the information in yourself is best for correctness and shock value.

2. Talk to Your Spouse

Begin discussing with your significant other that you’d like to start budgeting and organizing your finances. This could be a long conversation or a series of conversations, but it’s best to have buy-in with all parties before beginning. Focus on Why your want to budget and not How you will budget.

3. Balance Your Checkbook(s)

This could be a big task, but it has to be done. Why? You need to know how much money you have in order to start budgeting. Also, by looking at your checkbook you’ll begin to see what you value. If you need help, there are many good resources.

4. Figure your Personal Net Worth

By knowing how your assets and liabilities (what you have minus what you owe) stack up, we’ll have a much clearer view of how to budget and attack your debt. Plus it might make you feel good about your self as you’ll notice assets you forgot about. Continue Reading…

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