I’m always amazed when I hear people say that they don’t use a budget. It is not a tremendous surprised then, to know that 78% of American live paycheck to pay check and are, on average, only three pay checks away from homelessness. Even when our finances were really HURTING we still utilized a budget, though, not a very good one.
You NEED a budget! No matter what your income is. You need a budget when you’re broke, and you need a budget when you’re swimin’ in it! When you cook something new, you use a recipe, when you build some thing new you use a blue print or instructions. When you go somewhere new, it’s good to have a road map. That’s all a budget is! And Setting up your first one doesn’t have to be complicated, doesn’t have to be too restrictive and isn’t annoying. It’s you taking control of your money and deciding where it needs to go, on your terms. It’s how we finally managed to learn how to put money into our savings account and start to be able to LEAVE it there!
How to set up a budget in 6 EASY steps!
- Start with estimating your paychecks. It doesn’t have to be exact, and from time to time it will change. You changed jobs, you got a raise, you had to cut hours for some reason. But go through and put in the smallest average amount in your paycheck estimator. This gives you an idea of what to expect for the month. Don’t include over-time. You just want the bread and butter, what you know you will be most likely to count on for your income for the month. Add up the totals from each paycheck and put the estimated total in also. Leave a space to write in what you actually made each time so that you can compare numbers. Maybe you were way off, maybe you picked up extra, or maybe you got sick and had to take a little time off.
- Figure out what’s due when. Stop paying bills off after their due date! You risk shut off notices, late fees, and points taken off your credit score. Try to pay them early, and write down when things are due on a calendar so that you remember. By knowing when things are due, you can plan ahead when you should be paying them and what amount from every check goes towards your bills.
- Consider a cash budget. Some people use cash for EVERYTHING! We find it most useful to use cash for going into stores. Grocery, fun spending, allowance, eating out, all of that is in our cash budget. This needs to be included in your written budget to help you account for every dollar. It also helps you see ahead of time if you need to make adjustments, or if you have room for any extras, or a really good chunk left for savings.
- Plan ahead what you want to save. Take the balance of the bills and cash budgets to subtract from your income estimate and there’s your savings goal.
- Adjust! If it doesn’t work right the first few times, adjust adjust adjust. Did you blow all of your spending money in the first weekend? (I’m SO guilty of that one…) Do you keep going WAY over on your grocery budget? Keeping track of those flubs now, will help you see the bigger picture. When you know what you actually spend, you know where you can cut back, get real with your self, or adjust to make the numbers work better for you.
**Bonus tip** Take your biggest expenses (ie: Mortgage, or car payment) and split up the expense between the pay checks. This way you’re not stuck paying $1,000 (or more) in one paycheck.
**This example of mine is slightly different because we get paid every other week and may is a 3 paycheck month. So the first pay check and the last pay check look almost exactly the same because the last paycheck is going to pay the first bills of the June. There will be two paychecks in June still, so I don’t need that extra $400 home payment at the end of May, so that is just going into savings.**
It doesn’t get much easier than this! And it only takes a few minutes to get you really started. Where’s your biggest down fall with budgeting? Where do you run into problems when it comes to setting up your budget? Do you avoid budgeting at all costs? What budgeting questions do you have? Let me know!
Until Next Time Friends!