Creating a Budget ... where to start?

[KerriMc]

Thank you for all of your great ideas DH and I now just need to sit down and figure out what is going to work for us. I am going to start keeping track of everything we do spend and see what is happening. I know I have a tendency to buy things for the kids when I see them. I'm not as bad as I was for the first one, but I still do buy too much. I've been good the last few months though I'm learning along the way!

Again ... thank you ... and anymore good ideas please let us all know!!!

Kerri

 

[sbdorfner]

To avoid some arguements between you and your spouse, I suggest something DH and I started about 8 years ago...we give ourselves an allowance from each pay period. We are not allowed to argue or discuss how the other chooses to spend from that amount. Of course, if you're dealing with serious debt (as we are currently whittling away), it may be a few $$ per month to start with (as we did), but I could set my money aside and then splurge on a massage, manicure, whatever, without feeling guilty about taking away food or gas money, and DH could go golfing without me giving the evil eye...

 

[blanq]

The very first thing you need to do is write down every penny you spend on absolutely anything for at least a full month. At the end of the month, sit down and divide up all of your spending into 2 columns: wants and needs. And you need to be brutally honest and detailed here. Some bills might need to be split between the columns. Having a telephone is a need. Having caller ID, voice messaging and call waiting are wants. Buying food is a need but buying Kellogg's cereal instead of generic store brand cereal is a want. Also, as sparklemint said, don't forget bills that don't come monthly, like taxes, magazine subscriptions, club memberships, car registration, etc. Take 1/12 of those amounts for your monthly breakdown.

Once you've made the list, take a good hard look at what is in the wants column that could be eliminated or gotten cheaper and start trimming those items from your spending. That will free up money for savings and debt reduction (if needed). Personally, that's about as far as I would go with budgeting. I'm not a fan of following any kind of strict budget except for the savings part. As long as you are saving regularly, it really doesn't matter what you spend the remaining money on as long as you are living within your means and not taking on new debt to support yourself.

This is excellent advise, and I did just this when we started our first budget ever last fall (after 20 years of marriage I am embarrased to admit!). Anyway, I wanted to add that after looking at wants vs. needs and trimming the wants, I also took a good look at ways to pair down our needs. For example, I decided that changing our auto and home insurance deductibles from $500 to $1000 saved us quite a bit of money. I also was able to cut down our food bill by implementing a number of strategies learned on the budget board and elsewhere.

In addition, I would suggest you decide what you want from a budget. It can be one, or many things, but I think it's important to set goals and have a plan to get there. For our family, we were doing well with having little debt (just a 5% interest rate mortgage and a 0% car loan) and had our long term savings and college savings on track for our DS, but we were doing a terrible job with short term savings, so our primary goal when we started our budget was to increase our emergency fund to cover three months worth of expenses. Your goal(s) may be very different, but it's fun to set some and watch yourself get there!

Good luck with your budget! Oh, and one more thing. In my (albeit limited) experience with having a budget, I have learned that the beginning is kind of like being on a diet. It takes a bit of time to get into the swing of it, and sometimes you fall off the wagon. Don't be too hard on yourself if this happens...just pick yourself up and begin again until it becomes part of who you are.

 

[jenr812]

If you want to start a real budget and have trouble with where to start, visit a web site called Daveramsey (dot com). He is the author of the book, The Total Money Makeover.

My husband and I started this last year and it WORKS! And we were the WORST spenders and budget-avoiders. It saved our marriage. This is a great place to get started on getting rid of your debt. You may not do all the things he suggests, but you'll get the idea.

I agree with this post completely

Great advice on this thread Good luck!

 

[disneysteve]

after looking at wants vs. needs and trimming the wants, I also took a good look at ways to pair down our needs.

This is extremely important. When you really get down to it, few if any of your expenses are truly fixed. Mortgages can be refinanced. Insurance premiums can be lowered. Certain payments can be negotiated. Phone bill could be lowered by switching companies. If you really want or need to cut your spending as much as possible, the Need column is just as important to analyze as the Want column.

 

[littleEinsteins4]

want to read later

 

[PrincessMommyof2]

What a blessing that this topic was posted. My DH and I just started a budget and it's encouraging to see everyone's imputs!

 

[heathrow42]

I can't seem to actually do a budget. I have our savings automatically deducted before I start paying bills for the month. Whatever is left over we live on. If we go over one month and need to dip into savings, I tighten our belts the next month and spend a lot less on discressionary expenses. That's all.

Punkin, IMO you are half way there! In some way you figured out how much to deduct for savings... and you have that deducted first (hopefully, by direct deposit!) All you have to do is the same thing for the rest of your bills.

In our house, we do something similar to what most posters here do. We add up all of our "fixed" expenses (mortgage, phone, cell phone, cable, internet, insurance, anything that is the same each month or year) and figure out how much those will be for each month (taking the ones that are due once a year and dividing by 12)

Then we took out all our old bills for the expenses that fluctuate (for us that's gas, electric, water and tolls) We added those up and came up with a monthly estimate for those (and went a little high because gas always goes up)... some months we set aside more than the bill was for, but that's ok, because we'll need it in december!

Since we get paid twice a month, half of all our monthly expenses as figured above are direct deposited into what we call "the house account" This way there is always money in there to cover our living expenses, and I just go in and pay all the bills online.

So say your monthly income is $1000 -- and your average bills for the month are $500. If you get paid twice a month, have atleast $250 taken out of each paycheck.. this way you can make sure you'll always be able to cover your bills. Then with the remaining money, you'll be able to see if you are having too little or too much put into savings. If you have it set up to direct deposit $100 month ($50 per pay period) to your savings account, then $400 is the rest of your money for the month, you can budget further if you need to figuring out a grocery/gas/etc allowance..

Your local utility may let you get on a schedule thing that has you paying the same amount each month, that would make some of your fluctuating expenses be fixed I recalculate everything in January or if there is a major change (raise, change cell providers etc.)

I totally agree with the poster who said that you should have a little his and hers money... we each have our own little checking account.. it's nice to know that when he buys me a birthday gift or takes me out for dinner, he's really buying me a gift and it ain't my money!

--heather

 

[arminnie]

I have NEVER EVER been able to do a budget. I was a math major and have an MBA in Finance and I think that's the problem. I want everything to be TOO precise.

Here's what I did for years - pre-computers. I had a little book. I had three columns in it.

Column one - things that I knew I had to pay that month, rent or mortgage, utilities, car payment, school loan, car insurance (savings should go here too)

Column Two - things that I bought to live, toilitries,gas, food (groceries, lunches and dinners out). I had some control over the amounts here and could control the absolute amounts but really couldn't eliminate any category. It didn't take long to get a handle on what this was going to be approximately every month.

Category Three - the "THINGS", not all of these were totally optional. You have to buy some clothes, shoes, gifts, etc. But this included airfare to see my parents at Christmas, furniture, etc. This is the category I really had control over.

I also wrote down every single item that I charged - just like I wrote down every check that I wrote. In the pre-computer days it was often difficult to predict what a credit card bill was going to be - as merchants could take days or even weeks to process a charge.

Now I use Quicken or Microsoft Money, but used excel for years prior to those programs (which I usually get free with a new computer).

I still don't use the budgeting features.

But I do use my checking account as a cash flow projection. I know which bills are going to come in for a given month. I usually enter projected bills (even just estimates) about three months in advance. I use my credit cards for everything so that's a budget item - Put down $1000 (or whatever your number is) into the cash flow. I watch my charges online and know when I need to STOP) so I don't go over that amount.

One of the problems that I personally have with budgets is that they generally take your income and split it up into how to spend it. I call that the top down approach.

I prefer the bottom up approach which is to spend only what you really have to - of course being careful that is not over your income. If you do this successfully most people will end up with a nice nest egg. And then you can decide to purchase the extras from your savings instead of trying to figure out how to pay off the extras you've already bought.