Money Mondays – You Need a Budget!

You need a budget.  Seriously.  EVERYONE who has expenses and/or earns money needs a budget.  Yours may look different from mine; you might write down and track your expenses generally or you might carefully budget every penny.  But no matter how you do it you need one, especially if you are having money issues.

Why?  Having a budget helps you manage your money, plain and simple.  It keeps you from overspending and helps you to save money.  I can promise you that if you have not previously been tracking your spending that you will be shocked once you start.

Like I mentioned last week, Michael was the one who realized that we were spending more than we were making.  He has always been the one to keep an eye on the money, pay the bills, put some away in savings, etc.  I’m fine with that and am happy to just let him do his thing.  When he came to me and said that we really needed to cut back and work on a budget, I was totally cool with that.  In fact, I had been the one that wanted the budget (that fell through) several years ago so I was excited to finally have one.

He did a bunch of research, chose a budgeting program (that I’ll discuss in detail next week), and went to work trying to get everything set up.

Then we had our first budget meeting.  And I wasn’t so thrilled about budgeting anymore.

In fact, I was really mad.  Once we filled in all of our “half tos” like bills and estimated what we’d need for groceries, gas, etc., there just wasn’t much left over for other fun stuff.

Like…I wanted to just buy something whenever I wanted to!  I didn’t want to have to wait until there was enough in my fun money category to buy a new book or tote bag.  I didn’t want to have to choose between a new outfit for Hudson or a new cloth diaper because there was only enough for one of those in his category of the budget.  I liked spending money whenever or however I pleased!

For the first couple of months I’ll be totally honest, I was very irritated about the budget and the monthly budget meetings we would make me grouchy.  But it DID get better and I am so thankful for our budget now!

Just getting started in general with a budget can be overwhelming.  Here are 5 things you should do to help you create your budget.

1.  Grab a piece of paper and do a brain dump.  Just write, write, write.  Don’t try to prioritize or anything, just get it on paper.  Write down everything that you can think of that you spend money on (bills, necessities, fun stuff, gifts, whatever) or think you will want money for in the near future (new car, down payment, vacation, etc.)  Keep general categories (i.e. “restaurants” vs. “large Diet Coke at McDonald’s”) but try to think of as much as you can.

2.  Gather up all your bills and bank statements and credit card statements and begin listing how much each of your standing expenses costs.  And by that I mean the expenses that come around every month and are pretty much the same.  So, your mortgage or rent, car payment, tuition, water, electric, cell phone, amount you give to your church, internet, Netflix, etc.  If you have something that you have to pay every month (but that fluctuates a lot, like your electric) then look back at past statements, find an average amount, and use that.

3.  Prioritize.  What is important to YOU?  This is a big key right here.  What is important to you is where you should put your money.  For example, we try to eat organic and fairly healthy so we allot more money in our budget for groceries than many of my friends do.  However, having new clothes isn’t a big deal for us so we put less in that category (don’t get me wrong, I’d love to have more money to spend on clothes, but working within what we have at this time we choose more expensive food over more expensive clothes).  We also drive fairly old cars but prefer to have a little bit nicer of a house, so we put more money into our house than our cars.

Maybe going on vacation is a priority for your family.  Maybe it’s private school for your kids.  Or super fast internet.  Or the latest gadget.  Whatever it is, try to figure out the thing or things that are important to you and the things that may not matter so much.  That will help you determine where to put your money.

(Don’t worry about this being perfect!  You will most likely have to revise, reprioritize, and make some cuts before this is over.)

4.  From step #2 you should have a total for all your standing expenses.  Subtract that from your income.  Now you have an amount that is left for the not-so-set-in-stone expenses.

Look at your priority list and start assigning amounts.  Estimate how much you think you’ll spend on groceries each month.  How much do you think you need for car repairs?  Clothes?  Gas?  Eating out?  Manicures?  As you assign amount to your categories, subtract that from the amount you have to spend so that you make sure you’re not over-budgeting.

These can be very rough estimates.  Unless you have been tracking your spending already then you probably don’t have the foggiest idea how much you spend on things.  That’s ok!  It took us a couple of months of budgeting and tracking to get a good, consistent number down.

5.  Reprioritize.  At this point you’re probably finding that maybe there isn’t enough money to cover each of the amounts you put in all those categories!  Time to start looking at places to cut back.  I’m going to do at least one (maybe more) separate post about some things you can do if you have more things in your budget than you have money for so stay tuned for that in a few weeks.

Again, I want to stress this – do NOT try to get this perfect on the first go or you’ll quit like we did years ago.  This is just a start.  It WILL get easier.

Assignment for this week:

– Easy-ish: Write down everything, I mean EVERYTHING, that you purchase this week.  Groceries, ice cream at Sonic, gas, shopping, haircut.  Whatever.  This will help you become more aware of what you’re spending and where it’s going.

– Harder: Sit down and do the 5 steps that are listed here!

Come back next week to learn how to put this budget into action and get rocking and rolling!