Wednesday, July 6, 2011

How do I make a budget!?!

I have been asked that question a few times now.  It really is not a hard thing to do.  It takes a little time, and if you're like me, a little bit of "getting over the guilt" of wasting money by not making a budget sooner.  Anyways, I've written down the steps I follow for making a family budget.  I hope they help.

1.  List your monthly income - ALL of it.  Full time job, part time jobs, side jobs, child support, etc...

2.  List your monthly expenses - ALL of them.
     Home/Rental Insurance
     Car insurance
     Internet/Cell phone/Cable
     Life insurance
     Eating out
3.  List your debt repayments - ALL of them
     *these are the things we are trying to pay off.  Imagine how much more money you'll have each month
     when you don't have to give half of each paycheck to somebody else!*
     Credit card(s)
     Car Payment
     Medical Bills
     Student loans

4.  List your miscellaneous stuff
     Hair cuts
     Dog groomers
     House/car maintenance
     Gifts (Christmas/b-day/anniversary etc...)
     * I have these as my sinking funds.  I don't have these expenses each month, but when I do they mess up my budget because I never budgetted for them.  So, I now split them up and set aside a little each month for these things.  For example: in our house I get my hair cut twice a year (at $30 each time) and Chris gets his cut every 6-8 weeks (at $20 each), so over the period of a year we spend roughly $200 total on haircuts.  So I take that $200 and divide it by 12 (months a year) which gives me about $17/mo I need to save for haircuts.  Sure, some months it doesn't get touched, but when one of us needs a hair cut the money is there and it doesn't blow our budget.  We do the same thing for the rest of the above categories.

4.  Look at what is left on paper.  Do you actually have that amount left over each month?  The answer for my family was not only no, but OMG! we are supposed to have money left!?!  If you're like I was then you have a leak in your budget.  To find it look back over a few months worth of bank/credit card statements.  Our leak was in our food budget.  The amount of money we were spending on food was obscene; especially for a family of just two people, but since we have that reigned in a LOT we are doing much better.

5.  The amount you actually have left over is considered your snowball.  This is the "extra" money you use to pay down debt or put towards savings, or another goal if you are at that point. 

We have made it sort of a game to try to beat our expected snowball.  What I mean is, if on paper we should have $500 left over we try to cut other places (groceries, eating out, or gas mostly) to see if we can save more then the $500.  Yes, that probably makes us dorks, but we are always one step closer to our goals.  :)

If I have missed any categories please let me know.  Remember, everybody's budget is going to look a little different, but they're all great if it is a plan that works for you.

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