Budgeting is a skill that everyone needs to learn... young and old, rich and poor. It is the key to successfully living within your means. And in the current financial strain many of us find ourselves, budgeting is more than important; it is essential for survival and keeping oneself out of debt.
Why budget? Budgeting helps people stay on track, spending less than they make. It can help one spend and save better. It can be eye-opening to see how much money is being spent at fast food restaurants and how much can be saved from eating left-overs one night.
Many have systems that work for them and I have a system I have been using for years now and I love it. I am going to share one of my deepest financial secrets because it might just help someone out there.
This is all you need:
- Budgeting spreadsheet (This is the one I use: https://spreadsheets.google.com/ccc?key=0AvyVgg-3I2uXdEZSMlY5ZmZGMDF3RURudzd3RmZFaVE&hl=en&authkey=CNKXp6EP) Fancy software is great but when you are tight for cash, this totally does the trick.
That's it! (That's the easy part)
Here are the steps to filling out a budget planner. Using the sheet from the link provided above, fill in any cell that is yellow or gray. DO NOT EDIT THE GREEN BOXES (those auto-calculate!).
1. Start with the estimated income. How much do you think you will make this month? Shoot low and if you make more, great! If you estimate low, you know you will be able to cover everything on the budget and you may have some money left over. Add any other sources of income.
2. Optional: You can fill out your withholdings. I like to keep track of them otherwise you would just fill in your net income (the amount you take home on the check) and skip this part.
3. Next, fill out your fixed payments and finance payments (loans, rent, etc.). You know exactly what to put there because the payment never changes. Gather up some old utility bills and estimate the cost of utilities per month. Budget for telephone, gas, electric, water, internet, cable, etc. (I lump most of my utilities together.)
4. Variable expenses: This is where you have some room. You can adjust these as you look at your income versus expense to see how much money you have available. On the bottom of the workbook, you will see other tabs "Auto", "Groceries", "Food", "Entertain", and "Gifts". When I am entering my actual expenses, I use these sheets to keep track of each purchase. Just remember, do not edit the green cells. They calculate themselves.
I set a calendar notification on my computer for the first Saturday of each month to remind me that this is my day to review my previous month's budget and start my new monthly budget.
The review is essential as it will help inform you on your next month's budget. As I look at last month's budget, I make sure everything was either "under budget" or "on budget". If I was "over budget", I make sure I know the reason why (and it better be more than "because I wanted it") and find another category to cut from to ensure I can cover the "over budget" item. I look for trends from month to month and adjust my budget as I see fit.
It's always rewarding to come in "under budget". You can take that extra money and add it to your savings for a rainy day.
