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8.11.2008
Budgeting
My Tricks of the Trade question is how do you budget your money. My husband and I haven't budgeted our money before and have recently decided that we need to do that. We find ourselves spending too much and not saving enough. We sat down and calculated how much our bills cost and how much he makes a month and then decided what to spend where. However he has to register his car and replace the windshield so that blows our budget for this month. How do you budget your money, what programs do you use, what advice do you have?
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Good question!
My husband is really good with budgeting so he's in charge of figuring that stuff out. But what we've done is all in Excel spreadsheets. We took our monthly income and divided it into categories like rent, food, phone, cable, utilities, dates, etc. The ones that are the same every month are easy. And for the others we figured out what we usually spend and then every month we evaluate to see if we should make it more or less.
Then we have categories like car maitenance, and gifts, etc that don't get spent every month but we still put money there every month so that it builds up. That way when something does come up, like a car problem, we have enough saved up because we've been putting $50 or so aside every month for that purpose. Does that make sense? Then we also have a savings section and that money can also be used for emergencies if we need it.
Our family uses the following budget template from Excel:
"Personal budget worksheet"
http://office.microsoft.com/en-us/templates/TC062062791033.aspx?CategoryID=CT101172321033&av=ZXL000&WT.mc_id=42
You can modify the columns to reflect your own spending categories.
At the end of each month I tally up all of our spending (although I actually keep track of our spending at the end of each week - I just don't figure out total spending until the end of the month). We use our check card for all of our spending so all I have to do is go to my online banking and get the statement that shows what was paid out and where it was paid. After gathering 6 months worth of data showing exactly what we spend and where we spend it were are able to start seeing trends on where we can tighten up. From there we figured out what our monthly 'fixed' costs were (what did we HAVE to pay and what was the average we paid per month - mortgage, electricity, etc....), subtract that from our average monthly income - and we were left with an estimate of how much 'extra' we have per month for groceries, gas, fun, etc.....
We also have a dry erase board for planning other family needs and we write up there how much we have left of that 'extra' money throughout the month (since I tally up our spending each week I can easily keep track of how much we have left). This gives us a visual aid and keeps us in line when we run to Target for groceries and want to buy that fun new toy, or fun new whatever.....
We also are following Dave Ramsey's "Baby Steps" to get rid of our debt and get our finances in order: http://www.mdmproofing.com/iym/babysteps.html. The first step is setting up an emergency fund of $1000, then helps you figure out how to pay off credit card debt, and more. It's worth checking out at least - it's working for us so far.
~Heathere
We have a budget and we are both working really hard at keeping at it! Both Scott and I like to spend money, so it's been hard for us to really stick to our budget. The best part about our budget is that now we know exactly where our money was spent, and we've still budgeted to have fun, so we don't feel TOO restrained by it. We keep all receipts and put them into an excel spreadsheet at the end of the week.
We use Quicken and it is GREAT! It takes some time to get it all set up but it is totally worth it. I highly recommend it. My favorite part is the pie chart it shows you of where all of your money is being spent. You can also see bar graphs of your expenses for the month right next to your income. It really helps me visiualize how I am doing at living within my means. The more I check in with my budget the less likely I am to overspend. It's amazing how fast I can burn through a paycheck :) For the bigger items, I agree with Cassi that you need to budget for them on the off months as well so that when you do owe auto insurance or service, etc. then the money will be there. We actually use our credit card as a debit card...meaning we pay it off every month so we never have any credit card debt...but we get 1-3% cash back at the end of the year on all of our purchases which can be quite the christmas bonus! You just have to make sure you always pay it off...otherwise the cash rewards aren't worth it. I'm also completely addicted to saving for retirement because we are at the age when we should be contributing to it so that it will make a big difference later. Make sure to budget for retirement (Roth IRAs etc.)!!
And I agree with Kara that you have to budget for fun too!
Now does anyone have any good suggestions on getting your grocery budget down!!
When we had an income we used Microsoft Money and I LOVED it!! I loved to be organized and I was able to track every transaction into categories and it even made a budget for us!!!
Now that we get our student loan dispersement at the beginning of every semester we use the "Envelope" method. Here is how the envelopes work. You title one envelope for evey bill/expense you have, then you divide your money into those envelopes according to the expense. (phone = $30/month, Rent = $1250/month, etc.) Once the money for that expense is used up you have no more for it. Regular bills are easy to manage, but food, gas, and other wants and needs are all harder to predict. You ALWAYS have a savings/rainy day envelope!!! If you don't like to keep cash around there are online systems you can link to your bank accounts (we just use ledgers for each envelope and we actually only have to fill them once each semester). For those in the similar student broke boat we pay most of our bills for the entire semester at the beginning as soon as we get our student loans. After that we know most of our expenses are wants and we don't have to give in. Hope this helps.
Try this to get a better definition of the envelope system:
http://financialsoft.about.com/od/glossaryindexe/f/Envelope_Budget.htm
You might have to copy and paste it into your adress bar.
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