Tuesday, June 21, 2011

So I want to make a budget, but where do I begin?!?!

The first step in determining how to set up your budget is to get organized. Pull together your pay stubs, your checking account register, your credit card statements, any auto draft payment information, as well as any outstanding debt payment information.

It helps me to have one place where I keep all of this information together. I have a inexpensive 2 pocket folder that clips into my Home Management Notebook. It looks like this:

Any time I am ready to reconcile last month's budget or to write the next month's budget, I simply pull out this folder. Everything I need is there. I also have in there copies of my blank budget, notebook paper, recommended spending percentages, and our monthly cash flow document. 

There are MANY resources out there that give you sample budget sheets. Here are a few:

Dave Ramsey Quick Budget Form

Crown Financial Quick Budget Sheet

as well as a Budget Analysis Form from Crown financial here

I took these resources plus a few more, and put together the budget that we use. 

I listed every bill that we must pay each month on a sheet of paper. I put beside it how much we typically owe as well as two more columns beside it. I will fill these in at the end of the month with the actual amount spent and then the difference between actual amount spent and budgeted amount spent. 

We use the cash envelope system, so that is included on our monthly budget as well. (I WILL POST HOW WE DO THE ENVELOPE SYSTEM TOMORROW). 

The last three sections on our budget include a section for Income and Total Expenses (for reconciliation purposes), a section for Grad School Savings,  regular Money Market Savings, and than any unforeseen expenses. 

It looks like this:

Here's a closer view of the different sections:

I like to keep ours all on one page so that it is easier to keep track of. I keep a stack of these pages in our folder and can pull them out and edit them at any time. 

We use a ZERO-BASED budget system, which means that we plan out ahead of time where every single dollar should go during the month. We plan for the exact amount we will put into savings, put into saving for graduate school for M, car repairs, gifts, home and yard expenses, everything! Most of this is taken care of through our envelope system as I'll describe tomorrow. 

When you begin working on your budget, the hardest part is knowing HOW MUCH to budget for each of your categories. I used resources from Dave Ramsey and Crown Financial for this. Here's a link to the Crown Financial page with this information:

Click HERE

For example, for our family of four, they recommend that we spend around 30% per month on Housing expenses. You can look at this chart and figure out (based on your income level) how much to spend on what. Our first payment is always our tithe and we tithe off of our gross income. We have seen the blessings that can come from this and so we strive to give above and beyond our tithe each month. 

So what now? 

Look at all the materials you pulled together. 
1-Figure out first what your total income is. We use gross income, but you can do it however you'd prefer.
2- Figure out what time frame your budget will be for. We do ours in four week increments because we are now a 1 income family and he is paid every 2 weeks. We start our new monthly budget out every four weeks exactly. 
3- Write out all of your expenses that are regularly occurring (such as mortgage/rent, Insurance, TV/Satellite, phones, retirement savings, etc. Using the link above, figure out what you SHOULD be spending on these items each month.
4- Make a list of all other expenses that you regularly incur in a month but that may fluctuate some. This is where your cash envelopes will come in (again, come back tomorrow to learn about these!)
5- If you are married, sit down with your spouse and go over all of this together. Look at all your expenses from the previous month and determine what you think you should spend in the coming month.

*If it is your goal to begin saving money, you have to SPEND less than you EARN! Seems simple, but for so many of us, this concept is hard to grasp. If you can make some cuts to the expenses you currently have, you can begin paying off debt. I will talk about this on Wednesday's post, but debt is NOT something you want to have. Period. 

*After looking at your regular monthly bills, call the companies that provide those services to you and negotiate a lower payment. I have reduced our bills SIGNIFICANTLY by calling and telling them that I would be dropping their service if I couldn't get a lower monthly price. This works! If the person you are speaking with can't help you, ask for "Customer loyalty" or "Account Termination". I have always found that the people you will speak with are desperate to keep your business and will make changes to keep you a customer. 

I have gotten our cell phone bill reduced by $35 a month, our satellite by $22 a month, and our Internet by $17 a month. Do the math- that's 74 dollars a month or $888 for making a few 10 minute phone calls!

Terminate any expenses that you don't really need. Are you paying $65 dollars a month for a gym membership that you don't use? As much of a fitness supporter as I am, you need to drop that membership! Most gyms now don't require contracts or joining fees, so cut that expense until you are actually going to use it! What about a home phone? Do you NEED to pay over $30 a month for a home phone or could you just use your cell phone? In most cases it's much cheaper to add minutes to your phone plan or add a friends and family option than to pay $30 a month for a home phone. 

Talk to your car insurance agent- are you getting the best rate possible? Should you increase your deductible a little so that you can lower your monthly payment? 

Talk to your benefits coordinator or tax professional. Do you need to increase your standard deductions from your paycheck? If you are getting a substantial refund each year from the state or federal government, then your money would be better utilized by increasing your deductions. If that money is yours, why let the government use it interest free? Change your deductions and then put it into the bank where you can start making interest on it for yourself!

There are MANY ways to save money and there are lots of people who know far more about this than I do. BUT, these things have all worked for us. We are surviving as a one income family and learning to be content with what we have!

Start working on the steps described above, and come back tomorrow. We'll talk about cash and how to make it work for you!

1 comment:

  1. Thank you for sharing, Kara~ We love Dave Ramsey too and have used many of his suggestions in creating our family's budget, etc. However, I need to be better about revisiting it often, so thank you for this encouragement!


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