Building a Better Budget in 2011
The dreaded B word. It's spoken in hushed tones among social circles. No one really likes to talk about it.
Does that word make you cringe?
My husband and I lived without any sort of budget for the first three years of our marriage. We paid dearly for this mistake and ended up living paycheck to paycheck and dependent upon credit cards to make it through each month. I suppose my lame excuse for this debacle is that I just didn't think we needed a budget. Our income was so limited, what was the point? Clearly this attitude did not help our situation.
Finally, after months of doing things "our way", we realized things needed to change. We sought help from a stranger and learned how to make a "spending plan". No, not a budget. Budgets are restrictive and confining, right? A spending plan would tell our money where to go each month instead of the other way around.
Here are 5 Simple Steps for making a Spending Plan:
1. Total up your monthly income from all sources, after taxes, to determine how much you have to work with each month. If your income varies, try to use an average over the last year.
2. Total up all of your set monthly expenses including housing, utilities, transportation, clothing education, food, credit cards and miscellaneous. Review your receipts or bank statements from the last three months to get an accurate picture.
3. Now that you have all your numbers, determine if there are areas where you need to improve or can cut back. Most households spend more than they realize on groceries, eating out, and entertainment.
4. If you are over or under each month, determine how to get your numbers to zero. Every dollar should have a purpose and a place, whether in savings, towards paying down debt, or giving to charity.
5. Tweak your plan monthly. This is the step most people do not do. An accurate spending plan will need to be adjusted each month until you really determine the right numbers. At the end of the month, review your receipts to see where you stand.
To get you started on the road to better budgeting, here are some additional resources you may enjoy:
Free printable spending record with categories for each day of the month on KingdomFirstMom.com
Free online budgeting tool and budgeting planner at Mint.com
Are you using a budget every month, or are you ready to make some changes?