I started off this series by encouraging you to set aside your excuses for why a budget won't work and asking you to join me in this budgeting adventure. I'm excited that so many of you are listening in and considering how a budget might help you with your finances.
Determining
to step out of your comfort zone to try this budgeting thing is the
next step toward financial success. When there's a will, there's
usually a way. And we've certainly found this to be true in our own
lives.
Before we got married, my dad challenged my husband and I
to set down and make out a workable budget on paper. Talk about a great
exercise to really get to know one another during our engagement!
I
would highly recommend all engaged couples consider embarking on the
exercise of budget-making. It may be eye-opening to both of you!
Actually, whether you are engaged, newly-married, or celebrating your
thirty-five-year anniversary, I'd recommend you consider this
exercise--especially if you are struggling financially.
Where do you start?
Jesse
and I began by talking through every expenditure which we felt was a
necessity. Many people recommend writing down your income first and
then divvying it up into percentage brackets for the various
necessities and extras your budget might contain. If you are really
detail-oriented and a numbers person, this might work for you. But for
most of us, this would be overwhelming and we'd chuck the whole
budgeting thing before we even began.
Sit
down with your spouse (if you're married) and start by listing your
basic living necessities: Tithe*, Shelter, Food, Clothing, Utilities,
Transportation.
There are other items which are likely
almost-necessities, but we'll get to those later. I want you to focus
on keeping it simple! So we'll start with the big items:
*Tithe:
If you are a Christian, I heartily encourage you to set aside 10% of
your gross income first thing to give to your local church. By
cheerfully giving of our firstfruits to God (even if we don't feel like
we have extra for this!), we are demonstrating that God is the first
priority in life. God will bless you for your obedience to His commands
and your willingness to honor Him first
with your finances and to selflessly give to Him. And God can make the
90% of your income go farther than you ever thought possible--I've seen
this so clearly in our lives and in many other lives.
How much are you spending on rent or your mortgage per month? Write it down under the "Shelter" heading.
How much are you spending on groceries and eating out per month? Write it down under the "Food" heading.
How much are you spending on clothing per month? Write it down under the "Clothing" heading.
How much are you spending on utilities (electricity, water, gas bill, etc.) per month? Write it down under the "Utilities" heading.
How much are you spending on transportation (gas, car payments, car repair, etc.) per month? Write it down under the "Transportation" heading.
Now,
for some of you, you keep meticulous records and know exactly how much
you spend in all of those areas. For most, you probably have a very
basic idea but don't know specifically. You might know how much your
rent or house payment is, or how much your car payment is, but that's
about it. What do you do then?
Well, start by giving a basic estimate of what you think would cover all of your expenses in that category for a month. This
will likely not be totally accurate, but it's just your starting point.
I'd recommend that you estimate high when you first start out--you'd
much rather get to lower the spending in that category, than to have to
raise it.
If you are paid weekly, divide the monthly amounts by
four and set aside that much each time you get paid. If you are paid
bi-weekly, divide it in half and set that aside with each paycheck.
If
your income is variable, we'll talk more about how to budget on a
variable income in the near future, but for now, I recommend you take
into account how often and how much you are usually paid and then divvy
up the paycheck accordingly.
If you have no income, well, we'll talk about that later, too. :)
When you get your paycheck, automatically deduct from it the above amount that you have alloted for each category. The main reason for doing this is to encourage you to begin developing the discipline of covering your most important expenses first. This will save you much financial headache and turmoil.
I
recommend you go ahead and pay the rent or mortgage payment (at least
write the check), pay the car payment (though I hope to convince you
soon that you shouldn't ever take out a car payment again--ever! But that's for another post!), and pay the utility bills as soon as possible.
I recommend you take out cash for clothing and food and stick those in two different envelopes to only
be used for food and clothing, respectively. If you've never used cash
like this before, we'll talk more about the envelope system and why I
recommend it later. I just encourage you to try it for now. If you're
like us, you'll find that taking real cash with you to the store
instead of a credit card or even a debit card means you find it much
harder to part with and so you're instinctively more careful about your
purchases.
For your gas, I'll let you decide what is best. We
use our debit card for this and set aside a certain amount every two
weeks. This allows us to pay at the pump and saves us some time and
effort. It's especially nice when I need to stop for gas while I'm out
by myself with the two girls. This is one of the few things we use our
debit card for. If you prefer cash or check, use that. I don't
recommend using a credit card for anything,
but I'll leave that option up to you if you're still not convinced
about shredding those up yet. Again, we'll talk more about that in the
future.
At the end of the month, stop and evaluate how this system worked for you. Do
you need to increase any of the categories because your estimations
were off? If so, re-work your budgeted amounts. There is absolutely
nothing wrong with doing this. In fact, it is to be expected. Your
budget is not a strict slavemaster, it is a guideline and tool that
grows and changes with you as you move throughout life. It will change
with the ebbs and flows of life and when you are first starting out, it
will need lots of tweaking.
If you have money leftover in any of
the categories, roll it over to the next month. I recommend you wait at
least a few months before lowering any category as you'd rather have
some extra than not enough.
Once you feel confident in the above
exercise of budgeting your basic necessities, you are now ready to move
on in the direction of budgeting more or all of your income. We'll
discuss that more in-depth in the next installment of this series. Stay
tuned!
If you have a budget, I'd love to hear how you got started with budgeting and the blessings which have resulted from budgeting.
Originally published February 2008.
