The “B” word…
In this computer age, most of us hardly balance our checkbooks when the monthly statement comes in the mail. In fact, many of us don’t even receive a statement in the mail. But that doesn’t mean that we shouldn’t still be aware of our spending, our limits, and our BUDGET!
At least half the people reading this are cringing at the word budget, and may even stop reading this article. It’s a shame really; it’s a shame that such a helpful tool has become such a ‘bad word’.
A budget is not meant to be a financial straight jacket or a cloud of guilt that hangs over your head every time you consider a purchase. A budget is meant to be a guide. A budget is meant to help you achieve goals, whatever those goals may be, and simplify your life. A budget is simply looking at what you spend, and putting aside enough of your income to cover it. And it doesn’t have to be complicated either, below is an example of a very simple budget.
We all have some fixed expenses that you have to consider; housing, utilities, insurance, etc… but after that your budget is all yours to have fun with. It’s never cast in stone and is meant to be a moving target that changes with you and helps you achieve your plans. Most budgets work best with some sort of spreadsheet software or accounting software, this allows for easy adjustments and updating.
The most difficult part of a budget is when you realize that you spend (or need to spend) more money than you make. This means you are going without, overdrawing your account(s), and/or using credit. Some of the simplest ways to correct this are to either increase your income or decrease your expenses. Easier said than done, for some people. For those that are having difficulty with this, a budget and possibly some financial or credit counseling are the best courses of action to take. Both of which can be obtained for little or no cost.
A few quick rules for budgeting;
- 40% housing ratio – If possible, your housing expense should not exceed 40% of your income. The less the better!
- Revisit often – You should recheck your budget often, monthly if possible, especially in the first year.
- Team work – If you have a significant other, you should both be aware of the budget and have input, but one of you should be the ‘finance manager’.
- Ask for help – If you are struggling, swallow your pride and get help! Financial counselors have some great information and tools available to help make things easier.
Here is a very simple budget that should at least get you thinking about your own income and expenses, if you haven’t already;
Your Primary Pay $
Spouse’s Pay $
Second job $
Bonuses, Commissions, Tips $
Other Income $
Total Income $
Rent or Mortgage payment $
Car Payment $
Household Utilities (Phone, electric, cable, etc.) $
Auto Expenses (gas, tolls, maintenance, etc.) $
Credit Card Payments $
Insurance (home, auto, life, health, etc.) $
Child Care $
Health (medical, dental, eye, etc./not covered by insurance) $
Entertainment (movies, vacation, videos, etc.) $
Gifts (charities, church, holidays, birthdays, etc.) $
Other Expenses $
Total Expenses $
Do you have questions or comments? Can you think of ways that you could utilize a Budget more effectively?
I hope this was helpful and look forward to hearing from you!