Archives For Budgeting

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 noteIf 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]

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…

Where is your money going?

I’m a professional at budgeting money, but I didn’t  start that way. There was trial and error along the way, but I now know how to budget like a pro. I’ve seen a LOT of budgets as my wife and I have been budgeting every month since 2007 and I’m also a financial coach. I can show you how to budget and have a little fun in the process.

This is a series of articles on budgeting that both the novice and veteran can benefit from. Happy budgetting!

I hope you are learning how to budget like a professional. My goal is for your relationships and finances to improve as you Learn How to Do Money Better! Please subscribe so you can stay informed of future articles.
(Photo by Images_of_Money)

 

Are you afraid of what's under the bed?

We all have financial monsters under the bed. It is time to face our fears.

Do you have objections to budgeting money? Do you have fears concerning organizing your personal finances?

There are many reasons to avoid budgeting, but are they valid?

I Don’t Need a Budget

I bet a burrito you need a budget.

Budgeting Will Kill My Fun

Did you know that you can budget for fun? It’s true! You can add whatever you want as long as your income will support the spending (and your spouse agrees). So go ahead and put some fun money in the budget!

Budgeting Is Too Hard

While it does take a few months to get the hang of budgeting, the benefits will outweigh the sweat and time you put into the process. I’m also here to help if you have any questions. Contact me.

I’m Afraid of What I’ll Find

Are you afraid of what’s under the bed? If you never look then you’ll never be able to fight those money monsters. Take a peek and begin to tame that dragon.

I Don’t Want to be Put in a Box

When a plan exists for the money, then you have freedom to spend within that plan without guilt.

“With boundaries there is freedom”-D.P.

What other objections do you have about budgeting? Are you ready to stop living in fear? 

(Photo by The Midnight Blues Photography)

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

I bet you a burrito...

Why budget?

It’s a new year and many of you are gearing up for changes. You might have even made resolutions or goals in the past few days.

I bet a burrito that your resolutions are somehow related to money, career, health, or relationships? Did I get it right? BURRITO for me! I was going to eat one either way. (Map to the nearest Chipotle Burrito)

Let’s talk money. If you are going to do money right, then you’re going to have to start budgeting.

I know that word makes you a bit queasy. There is a pill for that or an app for sure, but that’s for another post.

What is a Budget?

It’s very simple. A budget is a basic tool to tell your money whose pocket to go into. Should it go to your landlord, local barista (I prefer Peet’s if you are new here), local grocer etc. A budget pre-decides how your paycheck will be spent.

“That’s not fun!” “I don’t want to be put in a box.” you’re thinking. Well, you know what’s also not fun? I’ve made a list for your connivence.

10 Financial Situations that are Not Fun (Due to not Budgeting)

1. Those money fights with your spouse when bills are due.
2. Bouncing checks and paying bank fees with money you don’t have.
3. Having your debit/credit card rejected.
4. Loosing sleep because you are worried about money.
5. Not being able to make the mortgage or rent.
6. Having to work extra years because you didn’t budget enough for retirement.
7. Seeing the repo man drive off with your vehicle.
8. Telling your kids they are on their own for college funds.
9. Bill collectors calling about your unpaid credit cards or medical bills.
10. Still paying for Christmas gifts 6 months later.

Are you convinced you should budget? Are you going to make time each month to pre-decide where you money goes?

Action: If you are ready to start budgeting, start by writing your commitment in the comments below. Stay tuned and I’ll show you how to budget. 

(Photo by Lisa B.)

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