I know, you probably think budgeting is about as exciting as watching paint dry. But I find it very interesting and I’m not even a numbers kind of gal. I just like knowing where my money is going and how much I am saving. I have had many people come over to my house and see our wall of budgeting and asked for my advice on how to do it so I thought I would share that with you all.
But let’s backtrack a bit, back to when I got into budgeting. The whole reason I started on this path is because we went from having no money to having some money. There was a time when my husband was in grad school and I was still getting my business off the ground and we barely had two pennies to rub together. Then he had a year of working odd jobs until he started teaching full time. These were tough times but I learned a lot. I learned how little we could live on. It was one of the most valuable experiences of my life and I wouldn’t trade it for anything.
So when my husband secured the teaching gig with a salary, I set out to make sure we were living within our means and maybe save some money in the process. I wanted to make sure that we were in control of our finances since we hadn’t felt that way for a few years.
COME UP WITH A PLAN BASED ON YOUR NUMBERS:
So let’s get started. First we are going to come up with a structure and plan and then we will create a system to keep up with it.
1.FIGURE OUT HOW MUCH YOUR BILLS ARE PER MONTH: Take all of the bills that you have every single month, without fail. Items in this category would be: rent/mortgage, car payment, insurance, utilities, phone, internet, cable, student loans, etc. Even though some of these may fluctuate during the year, this is the money that you can count on going out every month and can pretty much total those up to get a standard amount. We are going to work with rough amounts for this exercise. So let’s say that this total is $2070.00.
Do not add standards like gas & groceries unless you spend exactly the same amount each month, we’ll take care of them later.
2. SUBTRACT YOUR BILL TOTAL FROM YOUR INCOME TOTAL: Let’s say your monthly income is $3500.00.So here is the math: $3500.00 – $2070.00= $1430.00
3. FIGURE OUT YOUR WEEKLY ALLOWANCE: This $1430.00 is what you have left over for what I like to call discretionary spending. Discretionary spending is anything that is not in your bill list. This does include your gas, groceries, and other necessities like clothes along with non necessities like going to the movies or out to a bar for drinks. So now you want to set a weekly goal. Take the $1430.00 and divide it by 4 and get a weekly allowance of $357.50.
4. MAKE A PLAN TO SAVE: If you can live on less than the $357.50 a week and want to save at the same time, you can set a weekly allowance that is lower. Or you can just save the excess of each week without actually changing the allowance.
Side note: When we started this budget, we had 1 income and were just barely living within that salary. We were using our entire weekly budget each week and it was hard. But as we started to make more money, we decided to keep our weekly allowance the same and save the rest. And as we consistently made more money, we inched up our weekly allowance.
COME UP WITH A SYSTEM TO STAY ON TRACK:
Now that we have our numbers, we are ready to put this plan into every day practice and use. We now need a way to make sure we stay within our $357.50 a week budget and the only way to do that is to write down everything we spend everyday.
1. CREATE YOUR BUDGET BOARD: Find a place in your home that you can put up a large dry erase board (we use a large mirror) or a big piece of paper. It is really important for this to be in your face and for every member of the family to be able to see it and access it especially if you have multiple spenders. But even if you live alone, I think it’s valuable for it to be large and in your face. You will write down all of your budget info down here every month for everyone to see.
2. MAKE A COLUMN FOR MONTHLY BILLS: Use the image as a guide. Make a column for the monthly bills. You will need to fill in the ones that change each month and re-total them up but it should be roughly the same. (this is why a dry erase board or a mirror is a good way to go.)
3. SEPARATE THE MONTH INTO 4 WEEKS: At the beginning of each month, separate the month into 4 weeks. If you go continuously through the year, you will be slightly off the months but don’t worry about it. Start with the first and mark out each 7 day period as a week.
4. WRITE DOWN EVERYTHING YOU SPEND EACH WEEK: You will write down everything you spend in the week. Ideally you would fill in what you spent at the end of each day. Then you can do a subtraction each day and find out how much money you have left for the week.
5. TOTAL UP YOUR WEEK: At the end of the week, if you have money left over, you can either decide to spend it on something you may be needing/wanting or save it. Also, some weeks are just more expensive than others, but then you will be able to compensate the next week because you will know you have overspent.
side note: We put everything on our credit cards and then pay them off at the end of each month. We tend to spend cash too easily so it helps us. Then we also have a receipt and a credit card statement to refer to for our expenditures. I find that having a place in the house to place your receipts is the easiest way to fill in the amounts.
6. TOTAL UP YOUR MONTH: At the end of the month. Find out how you did and write it down each month. If you saved $35.00 in January, write that down and if you overspent by $45.00 in February, write that down. That way you will have a sense of where you are and where you are going.
Last notes: There are times during the year where you will have large bills that are not monthly. You may have to fix the car, buy a washing machine or something like that. Just put it in your expenses for that week. You may also come into some extra cash like during tax refund season, the holidays or your birthday. Just add that into your income for that month.
YOUR FINAL RESULTS:
That’s it! I guess it may seem like a lot of work but I recommend getting started on a day when you are feeling particularly energetic. You know, that day when you just want to organize the closet?After a while it’s just habit and part of the weekly routine. I promise a couple of things will happen pretty quickly.
1. YOU WILL CUT OUT SILLY SPENDING: You will cut out silly spending on little things you don’t need. For us it was me going to the coffee shop and my husband buying sweet tea at the fast food restaurant. I was spending $5 a week and he was spending $1 a day and that really adds up over the year. We started making coffee and sweet tea at home.
2. YOU WILL FEEL IN CONTROL OF YOUR FINANCES: Even when we weren’t able to save money, I felt good knowing that we weren’t overspending and this system was the only way to keep us on track.