The general idea of budgeting your money is pretty stressful, because it seems easy and so difficult all at the same time. It should be easy, right? I think it is the pressure behind it knowing that it is important that stops us in our tracks in fear of really messing up.
For the longest time our family/guardian managed our needs, the expenses, and the responsibilities that come with them. For most of us we haven’t had money of our own to manage. Any money received as a child is usually given as a gift to spend how one pleases. As a child you get excited about being able to purchase those things that wouldn’t be bought for you. In one quick moment you go from having little to no money, to being able to buy what you want within that range of funds. Then almost as swiftly as it arrived into your possession it has been spent. As a child those purchases would most likely end up with you having a bag of candy and a stomach ache from not heading your guardians advice to not eating all of that in one day. If wise choices were made then you have something to show for it, but often times it slips away on little things here and there. This also happens as an adult and you are left wondering where your hard earned money went. Not making wise decisions about purchases can get you into more trouble as an adult. I am not going to get into the doom and gloom of financial distress, but I assure you it is real and is not a place that you want to be. Even as an adult with a solid income, it is possible to not have enough funds to take care of your responsibilities, and that is where budgeting your money can help
Budgeting, or holding certain amounts of money for only specific purposes, helps you to make wise money decisions..
To get started with budgeting you have to ask yourself some questions:
- How much money do I have each pay period after taxes are removed?
- How much money do I have each month after taxes? Total usable income for the month. Can I afford all of the expenses?
- What are my bills/expenses for the pay period /month? (I personally separate mine by pay period so I will know if there will be enough funds left over for other budget categories that don’t include the bills, or if I have enough funds to pay some bills ahead of the due date.)
- What other areas do I NEED to have money for? Groceries, gas/transportation, monthly medicines/prescriptions, etc.
- What expenses are a set amount and what expenses fluctuate?
These may take some time to answer, because you may not be used to writing down this type of information. Keep track of this info for a month. You can do it on a piece of paper, a calendar, notebook, or planner.
I know this looks like a lot of questions, but once you have these answered and get into the habit of having knowledge of your expenses it becomes a matter of just plugging in a few numbers. You’ll have total set amounts and total rounded amounts for each budget category. Evaluate for each pay period to see where your money needs to be distributed.
To find the rounded amount for fluctuating budgets, add the amounts for all of the numbers in that category to see how much was spent over that pay period. Round it up, this is a good starting point for that budget catagory (which is also subtacted from your check book register). Over time you will get an idea if more or less money is needed in that catagory.
An example of the rounded amount for a catagory:
5.75 + 10.34 + 98.25 +22.13 = 136.47 $136.47 rounded up to the next 10’s place $140 for that budget catagory.
You are in control and can change the amounts according to your needs.
- Some people like to use the envelope system. This is a cash system where your budget categories are represented by labeled envelopes holding that amount of cash for that specific purpose. I personally don’t use this method because our expenses are mostly paid electronically, but my husband used this method before we were married when most of his expenses could be paid locally.
- My preference is to use a written system along side my checkbook register to keep track of my purchases with my debit card. It is really not as difficult as it sounds. I keep only four things with me at all times to keep track of my budget: my wallet with debit card, checkbook/register, tiny budget book, and pen/pencil. Once I have my budgets set I keep a running total in my budget book as I subtract from those funds in the appropriate category.
Before separating funds into budgets I make sure that my checking account register is balanced. (This will be another post. Leave a comment if you are interested in learning how to balance a checkbook register, and any specific questions you have on the topic.)
* REMEMBER THIS IS ALL ON PAPER MOVING NUMBERS AROUND. THERE IS NO MONEY MOVING OUT OF YOUR ACCOUNT RIGHT NOW!!
- Balance Checkbook Register (Know how much money you have)
- Use the gathered information from the month to set up budget categories.
- Set your budget amounts for that pay period making sure that you have the money to cover all areas.
- Record in your checkbook register the money that is to go out or to be held and used a little at a time (Separate bills, Separate budget categories) Subtracting these amounts from your account total in your checkbook register.
- Where ever you are keeping track of your budgets make sure that there is plenty of room to keep a running total and notes of when and where that money was spent. If the whole amount was not spent in that pay period either add it back to the checkbook amount or move it forward to the next pay period’s budget in that category (or savings).
- Go through and check your incoming and outgoing amounts for the next pay period to see if there is anything that needs to be paid early or money held to make the next pay period comfortable.
To be honest, there are times where there are not enough funds to cover all of the bills, budgets, and outgoing needs. Sometimes there is just not enough money coming in, and that is a pay issue, but sometimes we just need to spend wisely. There may be places where you can spend less by changing habits, changing amount of services needed, changing to less expensive service providers, or using less of a costly thing. Using a budget helps us to be aware of our money and if a change is needed. Looking back on the budgeting records you can see where you may be over spending. You can make changes to have your money work best for you, and still feel freedom.
When you don’t make a lot of money saving is difficult. I have heard that you are supposed to pay yourself first before anything else. That is all well and good if you have the extra to begin with. What I say is, “After working out your budget with bills, food, gas, medicines, etc. How much of what is left can I put into savings?” Yes, that $10 is worth it! You put in more when you can, but even that little bit can get you to a better situation. My Savings category is not in every budget period (it needs to be and I should make that a priority…I think I will. It won’t hurt anything!)
Once your budgets are set and your money is balancing out then you can use the money as needed to pay those bills and spend from the categories. Keep track as you go so you don’t over spend.
I knew that having a budget was important, but I didn’t understand how much of an impact it would have on our lives.
- We no longer stress over unpaid bills, and late fees.
- We know that we can afford the food that goes in our cabinets.
- We know right away if we have the money to go and do something fun.
- Our credit score has steadily gone up so that we can move forward in our lives by being trusted with larger amounts on loans. (still keeping any new bills within our budget)
- We do not need co-signers on loans.
- We don’t live in fear or threatening collection calls.
- We no longer have to borrow money with interest that is hard to pay back on the next pay day.
- Our daughter witnesses how we manage the money and will know how to do this herself when she gets out on her own.
Don’t think of keeping a budget as a restriction, but more as a way of giving yourself permission to spend knowing that all of the important areas have already been accounted for.