Budgeting Basics


Last week’s post was on why it’s so important to have a budget. If you missed it, stop reading this post and click over to here so that you can be fully in the know on that. It will definitely help this post make more sense. Promise. Go now.

In an attempt to be thorough, this post became a little longer than most of my posts. Grab the popcorn before you start!
The word budget can be daunting for many, though it certainly doesn’t need to be! On the other hand, the word discipline – what you need in order to stick to your budget – can be quite the unpleasant word. At least for me. But thankfully this post is mostly about creating a budget, not about discipline. Just keep in mind that a budget is about 10% math, 80% discipline, and 10% ritual. Once your math is complete, you need the discipline to stick to your budget, and you’ll need to create a ritual of looking at your account regularly – even daily – and tracking your expenses, month after month. But it will add up to a healthy financial state, making the math, discipline, and repetition totally worth it! 

Gathering items to get started: 

1. Your most current bank and credit card statements (log of expenses of the last month) 

2. A pen and paper (we’ll talk about non-paper budgets another time) 

Tip: start with paper for now to get yourself going with keeping a budget. A digital budget will speed things up later, but for now it’s probably overwhelming if you don’t already have a budget, due to all the possibilities! 

3. Your calendar of the next month or so

Putting together your budget:

1. Know your income and outgo from last month.

2. Take your entire month’s spending and start categorizing each item: your Geico insurance payment would go under auto; your Chick-fil-A expense would go under restaurants, etc. (Some are not as obvious so use your discretion on those.) 

3. After you categorize your expenses, begin adding up how much you spent in the last month for each category. 

4. Compare your expenses with your income. 

5. Determine your priorities and how much you want to save and/or how much you need to throw at your debt each month.

6. Determine what needs to be cut. If your outgo is more than your income (and it likely is!), you must make cuts; otherwise, you will go into debt (or more debt). Also if there’s no room for you to save any money, you definitely must make cuts.

Note: you might have to play with the numbers a bit! If you’re not accustomed to sticking to a budget, you may find yourself having to make some cuts that you never thought about before (like cable…or even Netflix! Yeah, I said it), but for the sake of meeting your savings or debt elimination goals, make the cuts! 

7. Begin building out your budget by category. Here are some basic budget categories to get started with (this is only a basic starting point; be sure to include all your own expenses):

  1. Housing (basics like mortgage and utilities) 
  2. Groceries
  3. Debt elimination 
  4. Savings
  5. Transportation (gas, insurance, registration)
  6. Clothing (not talking about wants but needs)
  7. Discretionary (entertainment, travel, gifts, date night, restaurants, general wants)

8. Take a look at your calendar to see if there are any upcoming events that will require extra money. (If it’s a special friend’s birthday, you may need to budget extra into your gifting category; if your car registration is almost up, budget extra money into auto, etc.)

9. For the items that are discretionary and/or fluctuate, assign those items a realistic amount to be spent. 

10. Input your finalized, budgeted amounts into their appropriate categories. 

When you’re done with this process, you should be able to look at your paper to see where all your money is going. Next week we will talk about how to keep up with your money, but for now, you can rest easy, knowing that you are in control of where your money is going.

Photo credit: Aaron Burden

Why Have a Budget

Yep, I just said the B-word. And maybe you should, too. According to a 2013 Gallup poll, nearly 67% of Americans do not have a detailed budget.

So I’m not surprised Forbes reported last June that 63% of Americans do not have enough cash on-hand to pay for a $500 emergency. $500 is a considerable chunk of cash, but a $500 emergency can easily pop up. Did you blow a tire? Well, of course, you should always replace them in pairs. Poof. You are in debt (or getting in great shape as you ride your bike all over town), and your $500 credit card swipe becomes $600 or more after interest. These statistics say that “normal” means being broke.

Have you ever looked at your bank account and thought, What happened to all of my money? Do you know what it feels like to have the cashier inform you that your debit or credit card was declined? Maybe you’re tired of juggling bills, trying to keep the lights from being turned off. I’m here to tell you that there is a better way, and you can live it! All it takes is a little planning and learning how to control yourself.

Someone smart once said, “Money flows from the careless to the conscientious.”

I’m not here to convince you to sell your furniture, ditch the car, or eat Ramen noodles for the next fifteen years. Gross. All I’m saying is that you don’t have to live that way any more.

How would you like to:

  • Tell your money exactly where to go instead of wondering where it went?
  • Stop going further into debt, and not have to worry about who is calling?
  • Get the best deal possible on pretty much every major purchase you ever make?
  • Never have to wonder if you can pay your bills?
  • Decide for yourself how much you want to have available to cover an emergency?
  • Ditch the debt hole you’ve been digging and start to build real savings?

Okay, so a budget is not magical. It won’t do any of those things for you. But unless you have an uncle on this list (and if you do, call me: we should be friends), it is highly unlikely that you will experience any of these things without a budget. We’ll get to specifics in my post next week, but for now, just answer this question:

Who makes the decisions in your home: you or your bank account?

PS – If I still haven’t convinced you to come back next week for how to create a budget, take a look at this. Or this. Or this.

 

Photo credit: Pictures of Money

3 Easy Ways to Save Money on Gifts

Are you trying earnestly to save money and just needs some tips along the way? While this is not a comprehensive, fix-all post for all your gift giving needs, these are some practical ways to help your dollars go a little farther. 

My heart is totally there – I’d LOVE to give my family and friends ANYTHING they want. Seriously. I aim to please, what can I say? But while my heart is there, my money is not there. (Trust me, I’ve looked.) So this post may fall more into the category of “you gotta do what you gotta do” than “these are the best shopping tips for gifts I’ve ever seen!” Or better yet, maybe this would fit better in the category of “first world problems.” At any rate, may they help you along your frugal way! 

1. Shop clearance and major sales – depending on how much of a shopper you are, this make take some time and patience. I might not shop as often as other women, but I do frequent clearance sections pretty much everywhere I go! If you have the storage space, you can shop after certain seasons (like Christmas) and hold on to your gifts till next year. I’ve found $5-$7 Old Navy polos in spring and saved them for birthdays or Fathers Day a few months later. (Sorry, Dad, now you know!) I’ve found some great Black Friday deals (like $10 crockpots) that made for some good wedding gifts. Like I said, it takes some time and patience sonetimes, but the savings is worth it! 

2. Regift thoughtfully – this is the thing that so many people do and so few people admit to! Okay, so you have to admit that sometimes you receive a gift that is just not you. It was kind, generous, expensive, beautiful…whatever it was, it just wasn’t you. Take those opportunities to save some money down the road. Think of who that gift would be a great fit for and plan to give it to them on their next birthday or at Christmas, whichever comes sooner. 

I was once given some jewelry, and while I’m grateful for it and appreciate being thought of, it was definitely not my taste. But I knew someone who would wear that jewelry so well (oh and it’s important to note that the person who gave it to me and the person I was planning to give it to did not and most likely will never know each other). So after holding on to the jewelry for a couple months, I gave it to this other friend for her birthday, and she loved it!! I’ve seen her wear it a few times which makes me so happy :). If you don’t regift it, it’s likely a waste. As long as you’re thoughtful about it, why not regift?

3. DIY gifts – this is my favorite. A homemade gift usually means so much more to the recipient than something you bought. (It all started as a kid when I would give my mom coupons for free foot massages or breakfast in bed… ) But seriously, when I know someone put their precious time and energy into something, it usually means much more to me than money or store bought gifts. Some gift ideas that don’t break the bank but don’t require sowing or ludicrous amounts of time include bath salts, sugar scrubs, baked goods (already baked or ingredients in a cute jar).

Tip: Here are 51 ideas for some awesome gifts in a jar.

Happy gifting!