March 16, 2009
Setting Up a Budget
Do you have a budget? Many people think of a budget as almost a form of punishment that keeps them from spending money on things they want. If used correctly, a budget is a powerful tool that can help you get the things you want in life. So why not start one today?
I like to use a combination of a set bill/discretionary bucket approach. This way, I do not have to track every penny I spend, but I track categories, especially for my discretionary saving and spending. I use a an Excel spreadsheet that I created based on my needs.
So how do you do this? First, make a note of your monthly pay. I put this at the top of a column for each month. Then I create two columns, one for my anticipated spending, and one for my actual spending for each month.
It looks something like this (using made-up numbers):
| Mar-09 | |||
| 5000 | |||
| Anticipated | Spent | notes | |
| mortgage | 2300 | 2300 | |
| nat gas | 165 | ||
| phone | 22 | ||
| electric | 90 | ||
| car insurance | 150 | 150 | |
| gasoline | 250 | ||
| food | 500 | 230 | |
| miscellaneous | 400 | ||
| unexpected bill | 24 | 24 | license renewal |
| savings | 800 | 800 | |
| cable | 111 | ||
| cell phone | 79 | ||
| gifts | 25 | ||
| 4916 | 3504 |
I used the Excel autosum feature at the bottom of each column. When I add an amount, it adds the column automatically, so I can see how I am tracking against my budget for the month.
What is nice about this method, is I have two buckets of spending that are not set: the food bucket and the miscellaneous bucket. If I shop wisely at the grocery store and have money left, say $40 in that bucket, then I can go out to dinner during the month, guilt-free. The miscellaneous bucket is my “walking around money”. I can do whatever I want to with that-buy a snack, go to a movie, whatever, again guilt-free. I always budget in a small amount for an unexpected bill- in the example here, a driver’s license renewal in March. The other important item is the car insurance. I pay this quarterly, but put money aside every month, so that when the bill is due, I have the money instead of a budget-buster. I also try and anticipate any items like gifts I may need to purchase ahead of time. With this budget, as long as I do not overspend, I will have saved $800 during March, because I put that money aside in my budget, first (see pay yourself first on this site). I move that $800 to an online savings account on one of the paydays.
Try it yourself- just fill in whatever bills you pay every month. Within a couple of months, you will have a clear idea of how you are spending your money be on your way to meeting YOUR goals.
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