I remember years ago when I was frustrated with not knowing where our money went, so I sat down with a pen and notebook, and figured it out. I had no internet, no budget book, nothing but my calculator and my brain. I added up all our monthly bills, divided them by 4 (we got paid weekly back then) and realized we had enough to cover our bills, plus save a bit each week. I was surprised – it didn’t seem like we were making that much money! 😉
Anyway, I showed my paper to my husband when he got home, and he was pleased! From that day forward, we have followed a loose budget. I say loose, because there have been seasons and events that came into our lives where we floundered again. But whenever I want order and insight to our finances – I go back to my simple budget system.
Figure your expenses
First things first. Write down all your monthly expenses. Fixed (like phone bills) and variable (like food). If you don’t know what you spend on monthly bills, you should look at your bank account or credit card and figure out what your monthly expenses are.
Tip: Take your bank statement from last month and add up each type of cost. Use different colored highliters or crayons to mark each type of cost. Make as many categories as you need. Groceries, fuel, eating out, entertainment, school costs, pets, etc.
2. Divide expenses by pay period
We get paid monthly. You may get paid weekly or bi-weekly. If you get paid weekly, divide all bills by four. For sake of example, I will use 400 for groceries. If we use 400 monthly on groceries, then I will need 100 per week. Do this with all your bills. Even the small ones.
3. Add the expenses
Now, add all your weekly amounts together. This is your necessities. Don’t forget to budget for savings! Now, is there money left over? Good, now make a “spending’ category for you and/or your husband. If there is more bills than money, you need to cut something. This may sound complicated, but it really isn’t. Yes, YOU still have to control your spending, but often just seeing how much you actually have to work with, helps you realize where your money is going and where it needs cut.
I will do an imaginary budget for you, to help clarify my ideas… I will round all numbers to keep things easy!
Say we get a weekly pay of 700.00. (not our actual income or bills)
Auto Payment: 300.00
Total monthly costs: 2,732.00
So we divide the monthly bills by 4 weeks: 683.00
You can see we have 17.00 left over! Yes that is a small number, but that adds up to 68.00 per month – that gives you extra for savings or spending money, maybe $25 each. This is a rough, unrealistic budget, as you can see. But it gives you an idea how I do mine.
Now, if you have significant debt, OR if your income doesn’t cover all your bills, you will need to either lower your bills or bring in more income. I suggest both. First, lower your bills as best you can by calling companies and asking (you’d be surprised!), then cut out as many as you can. TV and magazine subscriptions, maybe those treats at the corner store. Then, see how you can add to your income – even temporarily. Sell your junk on ebay or FB, have a yard sale or a bake sale (if legal in your area). Even a few hundred can often help you out of a hole.
Do you budget? Why or why not?
If you want some extra help with budgeting, read this book:
Or this one:
You may be interested in this post: Stop Overspending With These Simple Tips.