Thursday, March 27, 2014

How to Set a Budget in 5 Steps

Budgeting. Not a very fun thing. We were bad adults and didn't really set a budget until a few months ago. It was more of a, How in the heck do we set a budget? rather than simply just not wanting to.

In the end it actually wasn't as hard as I thought. It took a little legwork of about an hour, but I did get to play with highlighters! This is what I did to finally tackle the dreaded budget.



Gather Supplies
...Bank statement, credit card bills. I even went deep and took all the Target receipts and assessed the amount of fun, groceries, etc.

 ...Highlighters. Choose as many colors as you need, depending on how you want to break up categories.
Here is how I used each color of my highlighters

Orange-Student loans
Purple-Bills/Utilities
Green-Groceries/Food
Blue-Fun

...Monthly Budget Planner.

Calculate

...Monthly income. Any income that comes in the form of a check to your household.

...The categories. Time to really dig deep and see the number form in each category. The fun and groceries were our biggest "ouch." We knew it wasn't going to be pretty once we arrived at the final number.

Subtract

...From your monthly income, subtract anything that is a set expense. These are the student loans, monthly credit card bills, some utilities. The amount you are left with after this....This is now your NEW MONTHLY INCOME.

Why? This is the amount you have left to work with every month and is a realistic look at how you really need to be budgeting for non essential items. It will help cut down on some of the larger spent categories from step 2.

...From your NEW MONTHLY INCOME; subtract the rest of your expenses from the previous month. get ready, this might hurt. Similar to ripping off a band-aid. It came as a shock to us how little we had left to go into our savings and made a lot of sense why we were struggling with that.

Evaluate

...Where is the category out of control. Shocker, it will most often be your fun category. This is eating out, going out, picking up movies, shopping at Target (ouch). It will have the most wiggle room for you to cut back on.

...Where can you cut down your spending Groceries came in a close second for us after "fun." Coupons might be an option or starting up a meal plan so you aren't digging into that fun category too. Really look at what fits within your lifestyle to cut back on. We even looked into how we might be able to get rid of our cable. Still working on that one but I'm trying to cut that back.

Set goals

Now that you have seen how much you spent last month in the Fun category, set a goal for how much less you want to have in that category by the end of this month. Do this for every category that is not set.

...make an action plan for each of these. To cut down on fun and groceries, we made the plan to utilize coupons when we are able to and to plan out our meals to cut down on groceries and eating take out.




Congratulations, you now have a budget!!! Take a deep breath. You can do it. You will do it and save yourself a lot of moola.

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7 comments:

  1. Thanks for the tips! We don't have an actual set written out budget, and while I think we do ok with our budgeting, I think something that is actually written down would really help keep us on track.

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  2. We have a written budget that we've managed to stick to (sometimes a little less so!) for the past 3 years. It's so helpful to be able to see how much is going in and how much is coming out of the bank accounts--it makes me feel not nearly so lost where finances are concerned.

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  3. That was us before :/ That's why we knew we had to get our money under control!

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  4. I am a definite visual person so I need anything I want to do written down. But as long as you feel like you are on budget, it works!

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  5. That's how we felt before, lost. We had no idea what was going where and why. This has definitely helped us be more accountable and I love seeing the savings grow!

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  6. Great tips! I definitely need to do this...

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  7. You can do it! I wish we did it sooner as we are much more aware of when we are spending money and what we are spending money on.

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