Tuesday, May 24, 2011

Taking Control of Your Finances: Part 2 - Budgeting

I hope you all try this!  I want to prove to you how easy a budget is to create.  (Sticking to it on the other hand, well, that takes discipline and will power.  I will say this:  Just knowing that we have enough money to pay our bills and put money away for special things is enough to motivate me to stick with our budget!  Find your reason!)  If you have one hour in week 2 in June, you have enough time to create your budget!  Here are the steps I took to create ours a couple of years ago (once you do it the first time, it's easy to adjust and manipulate as you need to!  takes only minutes here and there!).  I hope these steps help you, too!
  1. Figure out what your actual 'take home' pay amounts to.  For us it's easy, because Aaron has been the one working, and he's on salary.  He brings home two paychecks a month and they are exactly the same.  Now, take into consideration I just started selling Scentsy.  When I start producing an income, that money will have to 'go somewhere' in our budget (we do a zero balanced budget, I'll explain that later).  Rather than count on me making a certain amount of money each month, we'll put all of my income into a place of excess like savings or put extra in miscelanious, or towards a vacation fund, etc.  I would, obviously, not count on my income to put into a grocery budget when who knows when I may have a bad month?  In other words, if you are on an ever changing income, calculate what you would expect to be your lowest month worth of take home pay... that is what you really have to work with in your budget.  Then, anything else that comes in those months could go towards 'extra' things.  
  2. Once you have your income established, gather all of the things you pay out on.  And I mean EVERYTHING.  Our budget pay outs include: tithe (twice a month), we give to our church's building fund (two separate pay outs - we believe that the building fund is above and beyond our tithe amount), our mortgage (which includes our home owners insurance and property taxes), cell phone bill, we sponsor a world vision child, our water bill, car payment (only one and we're working to get rid of that), car insurance, life insurance, trash bill, gas and electricity bills, directv bill, internet bill, and then we have grocery, miscellaneous, our savings, and the kids savings that we give to every month.  Start with all of the things that have a set amount.  Write all of those down.  
  3. Add all of these up and subtract that from your take home pay each month (the total established in number one.)  What you have left over is what you have to spend on the expenditures that change a lot but are the easiest to control like what you spend at the grocery store, what you spend on eating out, gas, clothing, etc.  For us, these include our grocery, misc., and savings categories.  
  4. This is where the budgeting comes in.  We do a zero balanced budget, which means that every dollar that comes into this household is accounted for.  When every dollar is accounted for, it's 'spent' before we get it, and it cannot be spent on anything else (even if that means that some of the money is 'spent' when it goes into our savings account.)  We rarely have anything significant in our checking account, it all goes someplace else.  So, now is when you take all of those payments you can count on, all of those payments that are relatively the same, and then all of your 'other' categories (such as the ones listed in number 3) and assign everything a dollar amount that, added together, equals your bring home pay.  In other words, when you subtract all of your expenditures from your take home pay you should get $0.  (It's important to note that for us, having a 'grocery budget' and 'miscellaneous budget' works for us.  I don't have to separate 'miscellaneous' into a whole bunch of different categories - though I do sanction out money to eat on occasionally.  You may be different!  You have to find what works for you!  For example:  I'm getting ready, when I re-evaluate our budget, to add an "internet purchases" category, as I've found that it's impossible to use cash in this category - which is what our miscellaneous category is, and that a place where money leaks is through purchases made online.  Making a category for this would allow me to have just enough in my checking account to have online expenditures that are paid for with cash - with our debit card.  Make sense?)
  5. This is the last part, and for me, the fun part.  It's the organizing part of it.  I put together all of our expenditures and separated them into two different categories... those that I pay on the first day of the month and those that I pay on the 15th day of the month.  This saves me all kinds of trouble.  A.) Every bill that comes in goes straight to a bill basket and I know it's on my budget and when it gets paid (without having to try to organize it.)  B.) I only have to pay bills twice a month, which means I can sit down and do it all at those times, and it becomes so easy that it's almost a 'brainless activity.'  C.) No more going to the the mailbox and having the 'kick in the gut' kind of feeling like "what is this bill?"  I, then, put these two categories down onto a spreadsheet with boxes available for me to (X) them off when they've been paid.  Then, I always have my literal budget to look at if any manipulating needs done :)
Please comment if you have any questions.  If there's one thing that has contributed to my less stress about money - this has been it.  This allows me to know that there is enough money to cover our expenditures!

Tune in tomorrow for part 3 of the series:  Make a plan to pay off debt. 

Until then -

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