How to make a budget

AKA: How to afford to do the things you want to do

You can read lots and lots of financial advice.  There are books and blogs and e-courses,oh my!  However, we’ve found that truly the ONE thing you must have if you want to succeed financially is the dreaded B word- a BUDGET!

The months when we get off track with our budget are the months that we lose sight of the big picture.  Creating a budget gives you the space to save, invest, and prepare for emergencies.  Even if your income is small, giving “every dollar a name” and living under your means will allow you to do this.

I’m going to walk you through how to make a budget in the same way we have been doing one for 12+ years.  All you need is a Google spreadsheet or a Excel file.

Here are the items that we budget for every single month, along with some notes:

Total Monthly income
Giving
Church Giving
Missionary Giving
Planning
If you are a standard W-2 Employee, you may not have these expenses, but being self-employed, make sure you pay yourself first! (And Uncle Sam, I suppose).
Taxes
Retirement
Utilities
Mortgage
Electric
Phones
Trash
Internet
TV (Hulu, Netflix, etc)
Water
Food
Grocery
Eating Out
Expenses
Gas
Car insurance For car and life insurance, if you pay every 6 months, divide your total by the number of months.
Health Insurance
Life Insurance
Business Expenses
Other
“Blow Money” This is usually extra money for eating out for us, but can be used for anything
Baby/wedding showers
Special occasions
Travel savings
Birthdays
Repairs/renovations
Emergency Fund If you don’t have $1000 saved to cover car repairs or a medical emergency, work to build this fund!
Your result after subtracting your income from your expenses, should be ZERO. If you have left over, considering adding to savings in your Emergency Fund.

 

If you don’t have a clear picture of what money is coming in each month or what your expenses are, how will you prepare?

We’ve been making budget each month since 2006.  It’s never one-size-fits-all.  You must meet each month and discuss the changes for that time.  Utility charges vary by season, kids need clothes and shoes at different times of the year- you must anticipate these things.  Sitting down on the first of every month (or a few days before) enables you to work through thing that may be coming up.

Here’s an example.  We’re going into February.  February in Ohio can be a snow train.  Have you budgeted for extra salt to treat sidewalks?  Extra heating costs?  A refill of your propane tank?  Also, in February, our family has two birthdays and Valentine’s Day.  Budget for these special occasions ahead of time.

More Budgeting Tips:

In your budget, I would recommend breaking down your larger expenses into monthly expenses.  You’ll notice I do this for car insurance and life insurance.  For instance, maybe you pay your car insurance twice per year and the cost is $600.  Instead of trying to come up with $600 in June and December, allot $100/month in your budget and then DON’T TOUCH THAT MONEY.  When the bill comes, the money will already be in your checking account.  You can also do this in saving for Christmas or other big purchases.

 You must use (some) cash.  It’s very hard to adhere to a budgeted number if you only use debit or credit.  We take out cash on the 1st and 15th each month to pay for groceries, eating out, blow money (usually ends up being eating out) and babysitting.  Having money that can be physically touched causes a different emotion than swiping a card.  I’ve tried using debit/credit for groceries and I always underestimate how much I’ve spent.  Seeing that there’s only $30 in my grocery envelope shows me that it’s time to buckle down and eat from the pantry or freezer, instead of making another trip to Kroger.  More tips on grocery savings HERE.

A budget works better when you stay out of debt.  Don’t look at your monthly budget like, “Oh, we have an extra $165 dollars every month, we could afford an upgrade on xyz.”  Negative, ghostwriter.  You’re looking for money to save, invest, and give.  Stop asking if you can afford the payment and start asking if you can afford IT.  You can’t get out of debt if you keep taking on more!  Whatever you need to do to push yourself- do it!

If there is money leftover, start saving for an Emergency fund (if you don’t already have one).  $1,000 should be enough in the shortterm to cushion against car repairs, a leaky roof, or Urgent Care visit.

Notice these are just expenses.  I didn’t add lines for saving, investing, or even vacations.  Add whatever you need to add as long as you aren’t spending more than you make!

Once you budget consistently for 3-6 months, you’ll notice something.  You will hardly check your bank account!  There’s no need to check it- you’ll know that you have the money because you told that money where to go!

Do you do a budget? What does your budget look like?



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How to make a monthly budget

 

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