Budgeting - Where do I start?

[virginiamama]

We desperately need to set up a family/household budget but I have no idea where to start. We just experienced lots of financial changes, sold house, finished building new house, paid off CCs, no car payments, but we do have different bills to pay with the new house (need to get used to different bills - some things cost more than old house, some less). Now what? I want to set myself up to be successful in making my new mortgage payments and figuring out how much we have to live on after that, so we can work on building some savings up. By the grace of God, we are in decent financial shape, but I want to take a proactive roll in making sure we live within our means. Any suggestions? TIA!

 

[Golf4food]

First you have to tally up how much you make. It all starts there!

Then tally up all of your fixed bills - the ones that don't change every month (mortgage, phone bill(?), cable, etc.)

Then you need to get at least a close estimate of the bills that do change by month - electric/gas, etc. things that go up or down by usage - and then budget either a high average of their yearly totals or an amount roughly equal to the highest amount you would expect to pay (for instance I always budget about $200 for our electric/water bill even though it is only that high in the hottest month or coldest month - the rest of the year you have extra left over but at least you know it is there when you need it and aren't scrambling - I'd rather have leftovers to use 11 months of the year than a shortage in 1 month that I am not prepared for).

Then start subtracting the bills from what you make. If bills are more then you know you need to trim some fat.

 

[Karenj2]

I love a program called YNAB Pro (www.youneedabudget.com); it's helped us control our expenses enough that we have been able to sock away a good amount into an Emergency Fund (more than the basic $1k), and it helps us to 1) save for the unexpected expenses and 2) not feel guilty buying a "big ticket item", since we save for it first!

There are plenty of other programs out there to help you - the biggest thing is to account for everything, so you know where possible leaks might be. Even Microsoft's template gallery has a budget spreadsheet that you can use.

Why I ended up with YNAB is because beyond the program, it helped me to learn a proper way to budget - not just accounting for what we spent, but actually budgeting and (hopefully) staying within the budget. Plus they have a great forum on their website that is just as helpful as the DISboards!

 

[minnie1928]

I love a program called YNAB Pro (www.youneedabudget.com); it's helped us control our expenses enough that we have been able to sock away a good amount into an Emergency Fund (more than the basic $1k), and it helps us to 1) save for the unexpected expenses and 2) not feel guilty buying a "big ticket item", since we save for it first!

There are plenty of other programs out there to help you - the biggest thing is to account for everything, so you know where possible leaks might be. Even Microsoft's template gallery has a budget spreadsheet that you can use.

Why I ended up with YNAB is because beyond the program, it helped me to learn a proper way to budget - not just accounting for what we spent, but actually budgeting and (hopefully) staying within the budget. Plus they have a great forum on their website that is just as helpful as the DISboards!

Karen, I knew I could count on you to suggest YNAB!

I myself am a Quicken fan, but I'm also an accountant by trade so it helps satisfy my anal accountant like needs. But Karen makes a good point, you really need to see where you are spending your money in order to come up with a budget. Also, keep in mind that budget's do require "tweeking". The budget you come up with today may not fit in a few months. A budget is just another way of saying that you have a plan for your money. Don't freak out if you have to adjust your budget, that's part of the learning process.

 

[Forevryoung]

I'm in the same spot- I need a budget.

BUT my income changes drastically from month to month and I am paid 3 months behind (paid monthly). This Friday I will get paid for the work I did in May. At least I can figure out what my check will be a few months ahead of time.

Anyone in a similar spot with their income? How do you budget for the changes? Can YNAB factor any of that in (if I put in what my income will be for the month)?

 

[SilverL]

I'm in the same spot- I need a budget.

BUT my income changes drastically from month to month and I am paid 3 months behind (paid monthly). This Friday I will get paid for the work I did in May. At least I can figure out what my check will be a few months ahead of time.

Anyone in a similar spot with their income? How do you budget for the changes? Can YNAB factor any of that in (if I put in what my income will be for the month)?

Dave Ramsey addresses budgeting when you have irregular income. He has a budgeting form specifically for it: http://www.daveramsey.com/fpu/home/index.cfm?FuseAction=dspContent&intContentID=135

I think he talks about it more in his book/class

 

[LKHomemail]

you need to know how much money is coming in and how much is going out EXACTLY to the penny for ALL EXPENSES. (this includes lunches, iced tea or coffee breaks, etc.)

next you need to look at what the actual expenses are, car insurance, food, clothing, dry cleaning, house cleaning, car washes, medical, etc. etc. and make a detailed list. you need to examine each expense and determine is there a way to lower this. for car insurance, do not automatically pay for a renewal every six months . ALWAYS call a half a dozen and get comparitive qoutes. you almost always save a hundred bucks in doing this work. next dry cleaning - figure out if you can talk to the dry cleaner and negotiate a better price. i have negotiated a better price with mine. i pointed out that the new dry cleaners cd one price offers one price for all garments. my own dry cleaner offered to meet their pricing. this saves me tons. some of my skirts / suits could be 8 to 10 dollars . they are now 2.50. look at your cell phone bills (assuming you pay them), figure out if you have the right rate plan , if not change them. ask around / compare with others. look at your electricity , is there a way you could use less to lower the bill ? learn to shop with coupons / plan meals around what is on sale. look for restaurant coupons and discount codes. get more savvy. all the money you save could be placed into savings. entertainment expenses can be lowered. it is not necessary to see movies at full price on a regular basis.

seconly look for ways to increase your income. what can you do to make more money ? what does it take to get a raise ? develop your career path. work with your boss to determine what your next job is going to be. begin to get the experiences you will need / gain the education or mentoring you need. are there side jobs you can do ? is there something you can do to invest better ? try a business ? second job ? hobby that might earn money ? many possibilities. explore all of them to figure out how to increase your money.

track all expenses / software or paper records (your choice). once a month, review the budget and determine where your overages are and why. plan better .

most people have no idea how much they are spending. or the cost of credit cards / atm fees, etc. you must control the money or it will control you and the choices you can make.

 

[Karenj2]

Karen, I knew I could count on you to suggest YNAB!

I myself am a Quicken fan, but I'm also an accountant by trade so it helps satisfy my anal accountant like needs. But Karen makes a good point, you really need to see where you are spending your money in order to come up with a budget. Also, keep in mind that budget's do require "tweeking". The budget you come up with today may not fit in a few months. A budget is just another way of saying that you have a plan for your money. Don't freak out if you have to adjust your budget, that's part of the learning process.

Yeah, I know, I'm pitiful how much I love this product... Re: the stuff in bold - another thing I like about YNAB is that it encourages you to figure out your budget on a monthly basis, based on your income, instead of taking your yearly, dividing it by 12, and hoping it works. My DH works with base+commission, so our income varies every month, so on certain months I can put more money into XYZ category than others (XYZ being an occasional category - like entertainment, etc....)

I'm in the same spot- I need a budget.

BUT my income changes drastically from month to month and I am paid 3 months behind (paid monthly). This Friday I will get paid for the work I did in May. At least I can figure out what my check will be a few months ahead of time.

Anyone in a similar spot with their income? How do you budget for the changes? Can YNAB factor any of that in (if I put in what my income will be for the month)?

Actually, what YNAB does is that it encourages you to build a savings buffer of one month's expenses, which will then get you to be able to budget your month based off of last month's salary. (i.e., if you get paid $1000 in July - even though you "earned" it in May - that would be the amount you would have available to budget for August. If in August you were paid $3k - for June's work - you can budget that $$ for September.) That way you ALWAYS know how much you have to budget, because it's what has physically been placed in your bank. Hopefully I'm explaining it right...

 

[PinkRhombus]

After a year in your home you should be able to go back and plug those dollar amounts from each month into your budget.

Make a list of your bills that occur monthly.

Make a list of other expenses that pop up monthly. Like dry cleaning, gasoline, car maintenance. I don't include groceries here.

Make a list of other expenses that come up during the year like insurance, property taxes, car taxes/plates, dentist and doctor copays, eye doctor, school supplies, clothing, birthday and Christmas presents, etc.

Then make up a spreadsheet in Excel (free version of something similar online at Google)

Basically, look at your checkbook and copy those headings into columns. The far right column should take the balance from the line above it and subtract everything to the left of it and give you a new balance.

You'll then go through and type in all of your paychecks for the next 6 - 12months.

The insert lines for the bills that will need to be paid between each of those pay periods.

Then you can see what you have leftover to spend on groceries (cutting down other expenses if necessary), savings, entertainment and dining out, vacations. And add those in between the pay periods, too. You can see where you have a little more wiggle room. Some months we see where we may be able to splurge a little more on some really good stuff at the grocery. Buy some good wine. Get the giant scallops at Sam's to grill.

I'm not kidding on this time frame. You need to be looking this far ahead. Too many people don't and look at the checkbook and say "hey, we have $500 extra this month...let's go blow it" on whatever it is. Then their insurance bill comes 4 months later and they're short.

 

[Forevryoung]

Actually, what YNAB does is that it encourages you to build a savings buffer of one month's expenses, which will then get you to be able to budget your month based off of last month's salary. (i.e., if you get paid $1000 in July - even though you "earned" it in May - that would be the amount you would have available to budget for August. If in August you were paid $3k - for June's work - you can budget that $$ for September.) That way you ALWAYS know how much you have to budget, because it's what has physically been placed in your bank. Hopefully I'm explaining it right...

Thank You, thank you, thank you!

I'm off to look at the software now

And thanks for the Dave Ramsey link SilverL, I will print them out and see how it goes.

 

[tonilea]

We love the Dave Ramsey program!