As I continue on the topic of organization for 2015, an important part of organizing is getting your spending, savings and debt in line. Some people don’t like to hear the “B” word…budget. If a budget is something that you avoid or that you don’t currently have, I highly recommend creating one. A budget is great to have for many reasons.
1. Offers a realistic view of where you spend your money
2. Provides a plan for the future
3. Gives you a sense of control over your spending
4. Functions at a communication tool
5. Helps with setting priorities
6. Offers peace of mind/less stress
7. Helps you have a plan to get out of debt
8. Helps you build up your savings
9. Helps with decision making
10. Promotes discipline to not waste money
A budget creates a plan for your money, your future , your life. If you are convinced now that you need a budget or have been putting it off because you didn’t know where to start or don’t have the time to create one, I have come to the rescue. I am sharing the budget that my husband and I currently use. *Please note I am not a financial adviser. I simply want to share a budget that has worked for us. Hopefully I can help provide some tips for you.
This attached budget focuses on a monthly budget, savings, and debt payoff. I have modified the numbers and have provided instructions to walk you through the different components of the budget. My budget follows some of the teachings from Dave Ramsey and Crown Financial. Before you get started I have added some tips below to help with planning a budget.
Tips for a Budget
1. Set time aside monthly to go over the budget. If you are married do this together.
2. If you are married give each spouse an allowance. This allows freedom for each person to spend money the way he/she wants to spend their money. This prevents judgments, criticism and ultimately conflict.
3. Use pre-paid cards. My husband and I use prepaid cards for our allowances. We will transfer a certain amount on the card and then I use that prepaid card to make allowance designated purchases.
4. Let technology help you. There are programs/software like Quiken that make tracking and categorizing your expenses very easy. If you don’t want to pay for one you can use free online services to help track spending. I have friends that use mint.com.
5. If you are married make financial decisions together. I was told once that it is better to be in agreement about a bad financial decision than at least you both made the bad decision together. This way you can’t place blame on your spouse if he/she made the decision independent of you.
6. Budget for two paychecks a month. Most companies pay every other week equaling 26 paychecks. This means that you get paid two times a month ten months out of the year and three times a month two months out of the year. If you don’t budget for that third paycheck for those two months then that is bonus money you can use.
Tips for Savings
1. Set up an automatic monthly transfer from your checking to savings. This helps to build your savings account without you having to remind yourself to do it each month.
2. Have two savings accounts, one for long term savings (emergency fund) and short term savings (everything else).
3. Your long term savings/emergency fund should have 4-6 months worth of expenses saved. Once you reach that emergency fund amount you can stop adding more money to it.
Tips for Managing Debt
1. When it comes to paying off debt I would recommend two different strategies I have learned. First list your debt from lowest payment to highest payments. Start paying off your lowest payment. If you are able to pay off more than the minimum payment then do so. Once you paid off the balance on the lowest debt start applying the money you had allocated for the lowest payment to start paying off the next lowest payment debt. See the debt payoff tab for more info. The second strategy I would consider is listing your debt with lowest to highest balance. If you have a low balance pay that one off first. In this way you get it paid off sooner and then you can start allocating the payment to the next debt faster.
2. A definite goal should be to pay off your car and not have a car payment. However your car won’t last forever. I have seen through different teachings that even after your car is paid off you should continue to allocate money for a car fund, so when you need to purchase a car again you have some of the money or all of the money available.
Tips for Credit Card Use
1. Don’t use credit cards or carry a balance on a credit card. I know several people that use credit cards to buy everything because of the cash back rewards, airline rewards and points. Just be careful that you don’t overspend and cause yourself to carry a balance.
2. Have one credit card for emergencies.
3. If you do use credit cards because of #1 one tip is to purchase gift cards at designated stores for budgeted items. For example if your grocery budget is $300 you could buy gift cards at the grocery store you shop at with your credit card then shop with your gift cards. This can help to put a limit to credit card spending and still benefit from the credit card rewards.
*Ultimately if you use credit cards it requires extra discipline to avoid overspending.
This is a simple budget to help you get started. I am married with no kids, so my budget reflects my life. You can add or delete items to reflect your life adding more categories for kids, other expenses, etc. Attached you will see an excel document. The equations and figures already entered for you. In this document you will notice 6 tabs located at the bottom of the page. The first three are the actual budget spreadsheets and the last three are the spreadsheets with instructions for use.
This is a simple budget for daily, monthly and yearly spending. If you are dealing with larger amounts of money and for longer future investment I suggest contacting a financial adviser to talk about how best to invest your money.
Feel free to print and share this document with others. If you share it online please link back to my site. If you have any questions please let me know.