Money. It runs the world. Builds empires. Ruins marriages. Causes stress.
Love it or hate it, money is unavoidable. As I see it, even the most remote household that is debt free has to budget to pay their land taxes. However, most of us are busy earning and paying much, much more.
Despite the importance of money in so many peoples lives, budget planning is not as well taught or understood as it should be. Too many are content with keeping their head above water, nothing more. The most they concern themselves with is the idea that “If there is money in the bank at the end of the month, I am doing good.”
That line of thinking is no way to live. We need more people to be budget planners.
Budgeting can be very complex, even in your home. But it does not have to be. It can also be very, very simple. So let’s start with simple.
This article does not cover every possible concept, but if budgeting is a new process for you, this will get you thinking in the right direction and provide you the basic tool you need: some basic budget software.
I decided to write this article because our LLC was officially formed this week. The first piece of mail we got as J&J Acres, L.L.C. – before we even got the receipt from the Secretary of State’s office saying we were official – was for a company that wanted to sell us devices and software so we could accept credit card payments. That got me to thinking: “Here is the problem”.
Yes, we plan to accept cards down the line – even I do most of my business online or with my ATM card. I rarely carry cash because that is how I end up loosing track of money. But too many people live off of credit.
Here is what you need to get started for your new budget:
- Your Payroll Stubs – or whatever paperwork you have showing your income
- Your Stack of Bills
- Some brainstorming:
- You need to plan for your bills that do not occur every month (more on this on the next page)
- Software that can read a .XLS file (Open Office is a good free choice)
- My Basic Budget Worksheet (Click to download)
When you first look at the budget planner – do not panic! This budget worksheet is fool-proof. It does all of the math for you.
However, there are some things worth pointing out.
If there is a place where there is a calculation being made, it is protected. There is no password on the file, so you can unprotect it if you like, but it should come protected. This is just to help protect against accidental changes.
I have included an example for 1 month worth of a budget. (Download it here if you missed it on the first page) I know your numbers will not be the same, but I wanted to show you an example of a home budget. It will make more sense for you if you change the name of some of the items, but here is the idea:
The first thing you need to do is change the number for the starting balance in the green cell. This number would be whatever you have in your account right now.
Now, most people will not have more than 5 paydays in a month. If earn money every day (like selling items from your home, contractual work, etc.), then lump these earnings into weekly amounts. These are what the vertical columns “Payday 1”, “Payday 2”, etc. are for. You could edit these to show a date rather than this simple title.
The next two lines, or rows, are “Running Balance” and “+/-“. Running Balance lets you see what you should have in your account after all the bills for the same time (The same Payday column) are paid. The +/- shows you just how much you either saved (+) or overspent (-) for the same time frame.
The +/- field in my personal expenses is always in the negative on the payday I have to pay our mortgage, which is why it is important to have money ready ahead of time for that particular bill!
Next is to specify where the income came from. I listed 4 places here, labeled as “Income 1”, etc. You could change these to something like your name, and the name of the other income earners in your home – or by source of income, such as “Job”, “Misc. Income”, etc.
In the example, there are 2 people being paid twice each month, but their paydays are offset. One is paid one week, and one the next.
Next are your expense items. If you are paying rent or a mortgage note, I feel those should come first. If nothing else, it is probably your single highest bill, so I put it on top.
You should save something. Anything. Start low, just to prove to yourself that you can do it. $5 per week if you must – but whatever it is – start saving.
Food is a fairly important need – so be sure it has a place in your budget as well.
Fuel, in this case, refers to fuel you consume frequently – mainly for your vehicles. If you use and refill fuel monthly for cooking or other needs, it should go here as well.
The row for household needs will require you to actually admit to yourself if it is actually a need. Repairs are a need, but remodels probably are not. This counts for the little stuff too – wear out your shoes and wear the shame shirt time and again – you don’t need to be broke to impress anybody.
Utility bills are further down the list because you can control these even more. It is solely up to you just how much electricity, water, and gas you use. It is also up to you to decide just how big of a phone, television, or internet plan you should really be paying for.
Debts could be credit cards, car notes, or any other item you are trying to pay off.
Annual bills are items that might not come around monthly, like taxes on your vehicle or property. Some people also pay their insurance annually or semi-annually. I would put items like that in here.
Your finances are exactly that, personal. Sure, I could look at your finances and tell you where I think you can make adjustments – but if someone else is having to tell you that, then chances are you are going to fall back in to the same habits and not actually follow a budget.
It is personal. Treat it that way.
After you plug in all of your numbers, line them up for the rest of the year. I only put in the example numbers for one month.
You will notice that all the of the calculations are being done for you.
Why plan for the whole year? So you can see the final number! This always helps me stay on task. Each month there is a column (in blue) that totals the month for you. It is a great way to let you think “Wow, we gained $200 this month” as well as “Whoa! Why are our utility bills so darn high!”
The same is true here. If you can see that by the end of the year – if you stick to your budget – you will have a nice large reserve of money built up, you can better convince yourself when the impulse to buy something happens to not buy it. What you will do with that reserve is a discussion for another time.
If, instead, you put your numbers in and everything looks bleak and you have more expenses than you have income – then it is time to get serious with yourself.
There are so many places to cut your expenses that it is impossible for me to tell you where to start. Some people will have problems in one area and others in another area.
You can try to lower your utility bills by employing tips for saving energy. You can cancel your cable television until some debts are paid off, etc.
If you can avoid eating out, great. If you know you will eat out anyway, then budget for it rather than avoid it, so the temptations do not overwhelm you. At home, eat fresh food more than prepackaged meals. The extra cooking time will save you a lot of money.
If worse comes to worse – find a less expensive place to live. I could nearly guarantee you that others are living happier lives in smaller, more affordable homes – whether you think you can do it or not.
How to Budget
Budgeting comes down to honesty and self control. You must be honest with yourself about your situation, and be willing to correct it through self control. If you cannot, it will never work. However, using our budget planner can help you visualize the benefits of staying on budget. Notice where your money is going and be honest about if the money needs to go there, or if it can be better used somewhere else. Doing these things will get in right direction and prepare you for more in-depth planning down the road.