Today’s post is fairly self-explanatory per le headline: HOW TO Create, Set, and MAINTAIN a WORKING budget.
Now, I am not a math person. Numbers hurt my head. Seriously. I am not technical, but this has worked for me, I just needed someone to show me.
This is, the NUMBER ONE way to help identify whether or not you have a spending problem or an income problem. AND, this is the number one way for you to visually see EXACTLY where your money is coming in, where it NEEDS to go, and where it’s ACTUALLY going.
Now, this may not work for you, but this is what worked for me and continues to work for me. I am showing you the EXACT spreadsheet formula that my husband and I use every month (obviously not with our actual budget numbers). This is also the exact type of spreadsheet that I used monthly in helping to get me out of debt.
Yes, I know there are sites like Mint and other budget helper apps, I have used those… but they just didn’t work for me. I like to kick it old school with my girl Mrs. Microsoft Excel (or Mr. Numbers if you have a Mac). It’s what has worked for me.
NOTE: If you have ANY questions, please do not hesitate to email me. ALSO, if you would like me to email you a copy of a pre-formatted budget spreadsheet that you can easily customize and plug in numbers, I am HAPPY to send one to you. I have one ready to go. Why not start fresh? It’s almost September. Eh?
Now, the goal of the budget is very simple: you want to keep track of every penny you bring in… as well as every penny you spend.
Seems like common sense, but is not always so easy in practice.
[STEP ONE: INCOME]
Now, in slide number one below, you see that this spreadsheet is titled September 2012. In the first section you need to determine and record your take-home-pay income. I have put in sample income for you at nice even numbers of $1,000 per paycheck and a total take-home-pay of $2,000 a month.
**NOW with enlarged slides!
-Now, the next step is to identify every expense you have that is NOT optional (i.e. rent / mortgage, utilities, etc.) For me, my tithe is first, and then beyond that I include my other “NECESSARY INFLEXIBLE EXPENSES”. This is the section in RED. Necessary inflexible expenses are bills and dollars that MUST go out every month.
-Next, determine your “NECESSARY FLEXIBLE EXPENSES” – these are things like gas, groceries, and toiletries. This is the section in GREEN. These are expenses that must go out every month, but YOU can do things to cut back if you’re really in a money pinch. (e.g. carpooling to save on gas, etc.)
-Lastly, in your expenses section, are your “OPTIONAL EXPENSES” – these are things like eating out at restaurants, savings*, and clothing**. This is the section in PURPLE. These are expenses that you could completely eliminate from your life and, believe it or not, you would not die. These are expenses I, personally, have eliminated before, and am still alive and kicking. Hard.
*I list savings in optional not to devalue it’s importance, but to show that it’s a more flexible number and can be adjusted easily depending on your budget that month.
**No, clothing is NOT a NECESSARY expense. Trust me. I went almost four years essentially buying NO new clothing unless it was, in fact, an absolute necessity. If you have clothes in your closet right now, you don’t need new ones if you have ones that work fine. This is for a separate post. This is also coming from someone who blogs her outfits. I love clothes.
Now, the GOAL of the EXPENSES column is to BALANCE your income and expenses. Your expenses SHOULD NOT exceed your income.
The key is this: at the beginning of the month, you need to have a plan for EVERY SINGLE DOLLAR that comes IN and EVERY SINGLE DOLLAR that goes out. Plan ahead of time.
Now, in the ACTUAL EXPENSES column (highlighted below) is where you keep CLOSE TRACK of every dollar you spend.
- Save EVERY receipt (this was a tough one for me to get used to!)
- Track EVERY cent you spend, EVEN if it’s a small expense (yes, I even record my $0.79 cent fountain sodas in my spreadsheet)
- Enter EVERY receipt into your spreadsheet at the end of the day
Below is an example of what it looks like to enter in individual expenses. The spreadsheet is per-formatted with formulas that will do the math for you. All you have to do is hit the + sign, the #, and enter. BOOM.
Now, if you have been keeping track of your expenses throughout the month, it’s important to periodically throughout the month, check in and see how you stand.
In this sample sheet below, the surplus of remaining money for the month is $193. In my example, I went over budget a little on groceries and miscellaneous.
At the end of the month, this is your chance to tweak for the NEXT month.
For example, if you are being realistic and you know that what you are getting at the grocery store each month is the ABSOLUTE bare minimum and you are going over budget each month, that means it’s time to adjust accordingly. You’re not budgeting enough. And vice versa. If you notice you’re staying UNDER budget each month, you can take that surplus and put it towards savings.
At the beginning of the month, YOU are in control of the budget. You decide where the money goes.
HOWEVER, with that in mind, once the budget is set, from that point forward for the rest of the month, the budget now controls YOU.
So, you make the budget rules, but then you have to FOLLOW the budget rules.
A COUPLE OTHER IMPORTANT BUDGET POINTS OF NOTE:
- Surplus in a particular category is not free money to go and spend on clothes or unnecessary items. Now, say for example your electric bill is $30 less than you budgeted for one particular month… that is NOT an excuse to go spend $30 on clothes. Put that $30 in savings, because guess what? Odds are your electric bill is going to be $30 MORE than you budgeted for one month and if that money is in savings, boom, you have it covered.
- If you are in debt, that minimum credit card / debt payment goes in the RED category of NECESSARY INFLEXIBLE EXPENSES. Your MINIMUM payment goes there. As you can budget accordingly and pay extra, you can adjust in other areas. I did not include this in the examples above because it is going to vary for each person and their situation. So, add your expense into that category and then adjust numbers accordingly in your GREEN and PURPLE categories.
So, there you have it. The dummies* guide to creating, setting, and maintaining a budget.
Questions? Comments? Concerns? Want a budget spreadsheet? I will send you one. For real. A pre-made budget spreadsheet is ready for you. Just ask.
*You are not a dummy.
“For I know the plans I have for you,” declares the Lord, “plans to prosper you and not to harm you, plans to give you hope and a future.” – Jeremiah 29:11