Many families live month to month, paycheck to paycheck. Some people don’t even know how much they spend each month on bills, groceries, or shopping. If you don’t know how much you are spending each month it is very easy to find yourself buried in debt and in financial trouble. If you create a budget and revise it a little each month you will know exactly how much money you have and how much money you have to spend or save. Budgeting sounds like such a good idea, but I know it may not seem like it is a necessity.
When I first got married I remember my in-laws always asking me if I have a budget for the family. I finally just said yes so they would stop asking. At the time it didn’t seem like we needed one. Now 10 years later I see how right they were. A budget is very helpful to have and can be simple to make. By making a monthly budget I know how much money I will need to pay my bills and how much extra money I have to save or shop with for the month.
The first thing you need to do is write down how much income comes in every month. Some people I know use a spiral note book. I use excel to create a monthly budget.
After you know how much money you bring in every month begin writing down every monthly expense. Start with the expenses that stay the same every month. Mortgages, car payments, and cell phone bills typically stay the same. After write down an estimate for the other bills.
For gas and electric bills look at last month or last years bill to make an estimate for the month. For the credit card payments start with an estimate of the monthly minimum payment.
Some payments aren’t made every month, but still need to be accounted for in a monthly budget. If you pay $3000 a year for property tax, put $250 in the budget for the month. Do the same for car insurance, car tags, etc. If you budget for these every month, but actually put the money in savings or another checking account it won’t come as a hardship the month these bills are due.
Next put some money in a “rainy day” fund. It doesn’t have to be a lot, but I put some in this category and use for Christmas and birthday gifts, special treats for myself, etc.
Next put some money in savings. Even if you can’t save a lot each month it’s important to get in the habit of saving. Even if you only save a little right now it will add up and someday you will be glad you began a savings account.
After all the bills are accounted for see how much money you have left over. Hopefully you do have money left over. With the money left over you will need money for gas in your car, groceries, eating out, and any other activities you may do during the month. Divide the money among these categories. If you have credit card bills try to pay more than the monthly minimum to get the credit card paid off sooner. I divide the monthly extra money by 4 (for the four weeks of the month)
I use envelopes and write “groceries”, “eating out”, etc on the outside. At the beginning of the week I put the designated money in these envelopes and keep them in a safe place in my home. By doing this I know how much I can spend each week. At the end of the week I put the extra money (if there is any) in the savings or rainy day account. It may seem silly to create different envelopes, but this way you know where your cash is going (groceries, eating out, etc)
This may seem like a lot of work, but once you create an initial budget, it’s easy to adjust a little each month. When summer months come you will know to add more to the electric bill and if you don’t use credit cards you know the monthly payment will go down a little each month.