Friday, January 9, 2009

How to make a Budget

Budget - the very word makes people groan. I'm not the best person with budgets and money, but I am learning. My husband is much better with avoiding impulse and emotional purchasing. In his infinite wisdom, God put us together.

One thing I did learn after I was married for a while, was how to make a budget. It really isn't as bad as you are thinking. Once you do it, you use it over and over. I've gotten off of my budget for the past few months and boy did I suffer. This month, I'm determined to get back on track. The basis of my simple budget is cash in envelopes. Sure there are fancy systems out there, but sometimes fancy systems can make people balk and avoid trying to budget at all.

Here is how I do it. I took a piece of paper and made three columns

"WHAT" "WHEN" "HOW MUCH"

Then I wrote down under the "What" who I paid the bill to

When = when it is due

How much = a high average of the bill

Then I flipped the paper over and wrote down when we got our first monthly paycheck and the amount.

I left some space and wrote down when we got our 2nd monthly paycheck and the amount.

Then I looked at WHEN the bills where due, and put them under the paycheck that came BEFORE the due date. Add up all the bills under each paycheck and subtract them from each paycheck. That's how much you have left with each paycheck to divide out for other things.

Write down other things you spend money on. Divide the remaining money out between those things. You may have to tweek things the following month depending on how it goes. OK - this is the key to success... the money for bills tithe, dues, and gasoline, stays in the bank. Everything else you take out in cash and divide into envelopes labeled with the name of the category and amount. Once you use up the cash in the envelope, you can't spend any more in that category. Period.

The fun part (yes, I said fun part) is that if you have any money left over in your envelopes at the end of the month, you can use it for what you like. It is a real incentive to use coupons and shop around for the best deal. The exception to this would be "home repairs". This is like a savings account and you should save the money in this envelope from month to month to pay for costly, unexpected repairs. You can add other envelopes like this for Christmas or other expenses that sock it to your budget.

You will notice I have "Fun Money" envelopes. This is money that my husband and I can spend on whatever we like and the other person can't fuss at us for it. You know what I mean. If my husband starts to fuss, I just say "Fun Money" and the argument is over. Of course, once the money is gone... that's it. It really makes you conserve that fun money.

Another little helper is to figure out exactly what denominations I needed for my cash envelopes (how many $20 bills, how many $10 bills...) You do it once and then you have it every month. It helps me when I'm at the bank teller's booth to tell them exactly what I need.

Here's what mine looks like (without the amounts of course) The items in red get cash folders.

1st Paycheck
Water
Mortgage
Home Phone & Internet
Gasoline
Homeschooling (books, field trips...)
Dining & Entertainment
Haircuts

2nd Paycheck
Tithe
Netflix
Cell Phone
Electricity
Trash
Natural Gas
Car Insurance
Dad's Fun Money
Mom's Fun Money
Pets
Medical - Doctor visits
Medical - Medicine
Home Repairs
Dining & Entertainment
Clothing
Groceries & household
Gifts given
Dues

I hope this helps. Of course, there are probably lots of tricks and software to help you with budgeting, but I prefer to keep it simple so I stick with it.

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