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Huddle up at the end of the month

How did you do? By this point you should have completed your pre-budgeting activities and completed your first monthly budget. What now?

At the end of the month or 1st day of the new month it’s time to huddle up with your money buddy (spouse or accountability parter if you’re single) and review how things went. This activity should only take 5-10 minutes once you get in the groove.

Huddle Around Your Budget in 4 Steps

1. Gather your budget, bank statements (online or paper), envelope system, open up your personal finance software, and sit down with your spouse or money buddy. (Reconcile your accounts if you haven’t done so yet.)

2. Celebrate any financial victories. If you never celebrate the small victories in life, chances are you won’t do much celebrating. Do a dance!

3. Did you go over budget?

  • Stayed in budget? Great! I knew you could do it!
  • Got money left over? Cool! What are you going to do with it? Roll it over to the next month? Put it towards debt or savings? Transfer it now.
  • Overbudget? That’s o.k. we all do sometimes. It will take several months to get a budget running smoothly. Now try to figure out what went wrong. Review some common budgeting mistakes you might have mande
4. Readjust your budget with what you learned for the coming month. If you’re able to pay off more debt or save a greater amount, then make it a priority.

Photo by joncandy

Action: Plan a post budget huddle. Go ahead and set a reminder for the rest of  year on the day you’ll  have your post budget huddle.

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]

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)

 

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]