Wednesday, April 18, 2012

Budgeting 101 - what I've learned

In January, I posted my goals for 2012.  The year is over 1/4 of the way through and I've made very little progress...

With my year-long maternity leave (with only 6 weeks paid) approaching in just a few months, I decided to tackle Goal #3.

I'll share my embarrassing little secret.  Since having kids, I have totally let go of our finances.  We've been debt free (besides house and 1 car) for quite a while, but with two incomes, I didn't really have to worry about money.  We've looked at what we need to get by each month before, but not to the extent that we did now.  I've not balanced or managed a checkbook for almost 5 years.  I just keep enough money in our checking to make sure that we aren't close to overdrawing anything.  I'm ashamed that it's taken me this long to suck it up and start spending some time looking at what we spend.

But where's a girl who has never had a budget before start?!?!

Well, I started with Facebook and asking my friends...duh :)  And two awesome resources that I found through my trusty FB buddies were Crown Financial Ministries and Dave Ramsey.  Both resources have awesome plans to work towards financial freedom (paying off debt, creating budgets, planning for the future, etc.), but I liked bits and pieces from both.

I used these resources to create my own custom budget...and I came up with 6 tips along the way to help YOU start your own budget.

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Know what your income is.
Take a look at how much money you are bringing in.  And understand what that number includes.  Is that before or after income taxes?  Are you investing in retirement?  Does that include your health insurance? Understanding what that bottom dollar includes will help you realize what you will need to include in your budget and what you are already taking out.  Plus, you need to know how much money you have to budget with :)


Look at your spending!
I recommend looking at your past few months of spending.  I looked at the past 12 months for some things and just the past 3 months for others. This will help you get a grasp on what your average electric bill or gas spending is.  And it will help point out your weaknesses in spending and EVERY LITTLE THING that you need to include in your budget.

Where does your money go?
What do you spend your money on?  Look at every little cent.  Everyone knows what their house payment is, what they pay for cell phones, etc.  But what about all of those little things that add up to a lot of moola? A stop for coffee.  Those cute new flip flops.  A magazine here or a book there.  Understanding what extra money you spend will help you plan for these things AND still budget for them if you want to keep buying these things.

Budget for the BIG things.
We only buy gas to heat our house one time per year.  And we only pay property and car taxes once per year.  And surprise, surprise.  Christmas only comes one time each year!  If we haven't saved for these occasions and don't have the extra money, it will  be oh-so-easy to pull out that plastic and charge it. Which is not good for ANYONE!  The easy way to save?  Figure out what you pay for this annual expense for the year and divide by 12.  Then include that number as the "monthly budget" for that expense.  By the time that your bill is due, you will have the money you need saved.

Lower some of those monthly bills!
I've found from experience that if a company feels threatened that they are going to lose your business, they are willing to work with you!  I'm not saying to call and complain just to lower your bill, but it doesn't hurt to call your TV provider, cell phone provider, etc. to see if there is anything that they can offer for you to help lower your monthly bills.  Trust me on this.  My home phone went from $49/month for basic phone and voicemail to $25/month.  Our satellite company knocked $10/month off.  Or look into other options for some of these expenses.  Lots of people get rid of their home phone, or switch from cable to satellite.

Try it out for a month.
Once you have your budget completed, try it out for a month or two and adjust some categories as needed. The goal is to balance out every month!  Have every penny accounted for somewhere.  If you are under budget anywhere, either keep a "balance" for that category or plan to add it to a vacation fund, or kids college account.

And since I'm airing our dirty little secrets here, our first month was a total budget fail!  We made the budget, but just spent like we did before.  And we went over $600 over budget!  April is looking much better though :)

Here's what our budget includes each month!  Yours will likely look a little different for every person, but that's the point in a custom budget :)

House
Mortgage Payment
Property Taxes - we don't escrow our taxes - {lump sum divided by 12}
Property Insurance

Utilities
Electric Bill - {average of the past 12 months}
Water Bill
Gas for Heating - for us we buy once per year - {lump sum divided by 12}
Home Phone/Internet
Cable/Satellite
Cell Phones

Food
Grocery
Eating Out
Hubby Cash to Eat Out - {once his allotment is gone, he has to pack :)}

Car
Car Payment
Gas for Cars
Car Insurance
Car Taxes - {In KY, we pay taxes on our cars once per year}
Maintanance

Medical
Health Insurance
Medical Bills - copays, prescriptions, etc.

Miscellaneous
Entertainment
Clothing
Misc. Misc.
Gifts - {I have gifts figured out monthly and have split the cost of Christmas over 12 mths and then figured any birthdays, Father's Days, etc. in for each month}



2 comments:

  1. Love this. We are slowly getting to this point. I need to get there faster. Thanks for linking it up to Pomp Party. I pinned this to the Pomp Party board:)

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  2. We budget the exact same way. We've been doing it for the past 3 years and I can't even tell you what a difference it has made! We don't have a savings account yet, but we also never go over our budget. Maybe once we are done renovating the house we can start to save. :o)

    The hardest part I've found to budget are the things like car maintenance and medical bills. There are some years where we don't go to the doctor at all, or our cars don't need anything more than an oil change. But then there was a year where both of our cars just kept breaking all the time. Trying to budget for the unknown is hard!

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