Hey, why are you laughing? I’m serious.
Budgets are great. The thing is,
at their core, they are just two lists.
Money coming in and money going out.
That’s it. If the money going out
is less every month than the money coming in then everything is gravy. If not….well….we’ve all been there and there
are some choices that have to be made.
And really making choices is what it all boils down to. You have to decide for yourself what
expenditures are important to you. For
me, I have a couple of kind of expensive hobbies (though I hope one will
eventually start paying for itself) and I have a pretty severe case of
wanderlust. So, any extra money after
mandatory expenses (and stuff for my kid) is earmarked for those activities
rather than the latest electronic gadgets or clothes or shoes. If that’s your jam then go for it. But make a plan for them and stick to
it.
Income is pretty straightforward. It's how much money you have coming in. For some people that's an easy number to figure out. If you are salary or hourly with consistent hours then you know that will be paid X dollars every Y days. If you are a tipped employee or rely on commission or have fluctuating hours then you're going to have to make an estimate on how much you make per week or month. In this case, I would always err on the side of caution and estimate low. I waited tables in college and, while it was nice to have cash every day, one bad night could blow my budget for the whole month.
Now that you know how much you have coming in, it's time to look at what's going out. There are a couple of kinds of expenses. Fixed expenses are expenses that are the same amount and due at the roughly the same time each month. These are things like rent or cell phone bills. Variable expenses are things that are due every month, but might be a different amount each month. Things like groceries, power (assuming that you don't use budget billing), or gas. These are things that you can, for the most part, control. If you have more expenses than income, then this is a good place to start looking for things to cut. The final class of expenses are what I like to call long-term expenses. These are things that happen at a fairly set frequency, but might only happen once a year or once every six months. These are things like taxes, car tags, Christmas or other gift-giving occasions, and insurance. It's good practice to be putting a little money aside regularly for these. For example, if your car insurance is $120 every six months then you should be setting aside $20 a month. This way, when insurance comes due, you aren't scrambling to come up with the entire payment. You know that the money is there for that bill.
So, how do you keep up with all this. I'm here to tell you that Excel is your friend. I'm a bit of an Excel junkie. I have used and refined the same Excel spreadsheet for years to keep up with my finances. Seriously, I've used one form of this workbook or another for more than a decade. In my case, I first figure out how how how much I can spend in each category and then use those numbers to forecast my checking account 12-18 months into the future. By doing so, I can see what affect spending extra money this month will have down the road and can make adjustments accordingly. I'll try to get an example of that sheet up.
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| Who am I kidding? I'm not nearly this organized... |
Income is pretty straightforward. It's how much money you have coming in. For some people that's an easy number to figure out. If you are salary or hourly with consistent hours then you know that will be paid X dollars every Y days. If you are a tipped employee or rely on commission or have fluctuating hours then you're going to have to make an estimate on how much you make per week or month. In this case, I would always err on the side of caution and estimate low. I waited tables in college and, while it was nice to have cash every day, one bad night could blow my budget for the whole month.
Now that you know how much you have coming in, it's time to look at what's going out. There are a couple of kinds of expenses. Fixed expenses are expenses that are the same amount and due at the roughly the same time each month. These are things like rent or cell phone bills. Variable expenses are things that are due every month, but might be a different amount each month. Things like groceries, power (assuming that you don't use budget billing), or gas. These are things that you can, for the most part, control. If you have more expenses than income, then this is a good place to start looking for things to cut. The final class of expenses are what I like to call long-term expenses. These are things that happen at a fairly set frequency, but might only happen once a year or once every six months. These are things like taxes, car tags, Christmas or other gift-giving occasions, and insurance. It's good practice to be putting a little money aside regularly for these. For example, if your car insurance is $120 every six months then you should be setting aside $20 a month. This way, when insurance comes due, you aren't scrambling to come up with the entire payment. You know that the money is there for that bill.
So, how do you keep up with all this. I'm here to tell you that Excel is your friend. I'm a bit of an Excel junkie. I have used and refined the same Excel spreadsheet for years to keep up with my finances. Seriously, I've used one form of this workbook or another for more than a decade. In my case, I first figure out how how how much I can spend in each category and then use those numbers to forecast my checking account 12-18 months into the future. By doing so, I can see what affect spending extra money this month will have down the road and can make adjustments accordingly. I'll try to get an example of that sheet up.
