Hello everyone,
As you all saw in the last post, I want to create and stick to a budget this year. No better time to begin that goal than January. I've decided to make this month's theme money saving/budgeting.
There are some people who are have immaculate budgets and some people who think that "Bud gets" is the start of a sentence.
Me?
I fall in the middle.
I do more than my fair share of impulsive buying. Way more. But, my bills are always paid and I can count the times I've over drafted on one hand.
Comparatively to some, I'm doing well. Then again, we're not supposed to compare ourselves to others are we?
So, the goal is to do better than myself. No time like the present to start. It also helps that I want to save for my Israel trip. If I want to save for that, I know that my current nonexistent budget won't do.
I sat down one night and figured out my own budget and set up some goals. I'd like to share that with you guys too. Occasionally give you updates on what I'm doing or how I'm doing. This way it gives me some accountability and kind of clues you into the process.
Once I had my budget down, I felt like the envelope method would also be a help. I'll explain what that once I'm done with the budget.
When I started, I didn't really know what to do with a budget. I knew that I had to figure out a way to allocate money accurately, so I did some research. One of the biggest things in life is credit. It's no different for budgeting either. If you're in debt, you need to try to settle it as quickly as possible.
To do that, you need to take a look at your credit report.
(That's me getting on my soap box.)
Credit is extremely important.
I know that may be kind of a duh thing to some of you, but there are people who may come across that and not know it.
Being in debt and having bad credit is like being enslaved. It controls the things you need or want. For example, there are many places that pull your credit before hiring you. This tells them a lot about you in a way, and also tells them if you're likely to steal money from their company.
Have bad credit?
No have job.
No kidding.
Why do I know this? I've done some dumb things and had dumb things happen to me along the way that has brought this to light. At this point, I have a little bit of debt to pay off, and I mean a little bit, but still. I want that off my record as soon as possible.
I'll get off the soap box in a minute, don't worry. To keep track of your life, you need to get your credit report. Now, you can get one free credit report every 365 days. Or you can pay for it. Personally, I like CreditKarma.com. It gives you the Trans Union and Experian reports for free and updates your score regularly.
Anyway, back to budgeting now.
So, when you first do a budget, you're supposed to take a cross section of your spending over the last three months, not counting Christmas. This will give you accurate trends in your spending. However, for me the last three months would not be accurate. I started a new job, did some travelling and had Christmas. I just did a month, because with the new pay, it's the most accurate thing I've got.
Before you start doing the math stuff, you need to have a long intimate conversation with your banking statement. This helps you see where you're spending your money so you can plan better. If you're accustomed to spending so much on Starbucks or McDonald's then you'll want to plan for that. Quitting cold turkey and not leaving any wiggle room for those things you know you love will only make you blow your budget.
Reading your statement will help you see that.
Once you feel sufficiently comfortable with where your money is going make category titles for the things. So for example, you know you're going to pay your phone bill. Make a category for that.
I broke mine down into broad fields Known Expenses and Unknown Expenses. I did this for a reason. Known expenses are the things I know the amount I will spend each month. I put things like rent/mortgage, car payment, phone, and electric in these categories. Unknown are things like my coffee, food, gas, or personal maintenance. Those are things I put a cap spending amount on.
I'm going to put in a parenthetical here, and expand on the cold turkey idea. As in it's a bad one. Remember, budgets aren't meant to limit you. And there will be months where you've got it all wrong, but they're here to help you live better.
So, make space in your budget for that treat you like to get yourself.
Parenthetical over.
Then I have an extra and savings category. These are the most fluid. Things that I know I want to budget for, but not necessarily want to buy right away.
To help you, I've created a little Downloadable Excel Sheet to help you work your budget. It's got the formulas already in place so you won't have to try to math.
The way it works is you do the amounts column first.
Enter your income in the top left column in the income area.
In the expenses area you enter your fixed expenses in the right column. The left one will populate with the money you have after you subtract the expenses.
The real budgeting comes in when you get to the unknowns. You have to decide the amount of money you intend to spend on things.
Next you actually budget. I have a included three other columns. Budgeted Amount, Actual Amount, and Difference. (The goal is to keep the difference at 0.) Difference has a formula in it that will do the math for you in budgeted and actual.
I think this one will work out and help you see on paper what your spending. The great thing is, this can be as broad or detailed as you'd like. If you want to do a broad one and then a detailed one, you can do details on a second page.
Ok, so having a budget is all good and well, but you also have to find the ways that help you save money. For example, I will swipe my card all the live long day, but I won't spend cash. I will literally forget I have cash in my wallet because I refuse to spend it.
I know this, so I was compelled to try the envelope method. Sounds terrifying doesn't it? It's super complicated too.
Just kidding. I'm an idiot; we know this. I can't do complicated.
So the basis of this idea is you get envelopes and put cash money in them. Once the money is gone, you don't have any more money for that category. If you're feeling crafty and motivated by pretty things, make your own from scrapbook paper. I'm using plain mailing envelopes at the moment. I'm not motivated enough to make my own.
On the front of every envelope, write the names of your categories on the front of the envelopes. You can also attach a blank sheet of paper on the back so that you can write down your spending if you feel the need. I wouldn't recommend doing it on the envelope directly, because it would get messy if you did more than one month or had a lot of purchases.
The theory is that this stops impulse buying.
That has to be the greatest enemy of shopaholic on a budget.
So, if you go to the store and don't have your envelopes, you can't spend the money. Here's another tip. Try to avoid using your credit cards unless you're paying something then pay the balance off right away. If you don't have the cash. Don't buy it.
And I'm speaking to myself just as much.
Part of the envelope system is it makes you really consider your purchases. Once you're out of money, you're out of money. This should make you think about where your putting your money. I think that is one of my greatest downfalls. I just will spend money not thinking about it. Granted, I don't run out of money, but I still spend it all willy-nilly.
I'm hoping this also helps with prudent planning. Things I want to accomplish, knowing that I want to put money towards them will help me plan. You can take money from your left over things and put them towards savings or projects. Things of that nature.
Here's something to keep in mind. You're budget will never be perfect. It will always be a work in progress. You may find things change over time, or that you haven't budgeted enough for something. If it doesn't work, we won't get discouraged, right?
As always,
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