Yes, I said I hate budgeting. I hate the day-to-day tracking and month-to-month reconciling of a budget, but I still need to know where my income and expenses are. I need to know how much I have to spend on groceries and entertainment. I need to make sure I’m going to have enough money to pay my heating bills in the winter and my electric bill in the summer. I’m going to share with you how I do my budget and how I’ve shown my clients how to put a basic budget together. I go back to this budget every four to six months or if I feel things are getting a bit tight or if we have major changes to our budget.
Most people have no idea where their money is going and wonder each month why there is nothing left to save or why there is just not enough there. Most of us are living paycheck to paycheck, hoping the car doesn’t breakdown. Are you worried about unexpected bills? Let’s try to quell those fears and take control of your bank account, rather than having it control you.
We’ll start with your income. You’ll need to pull out some bank statements (at least 6 months, but 12 would be better). If you don’t have your bank statements, see if you can get them through online banking. Most banks allow you to go back at least six months. If you have them, pull out your pay stubs. Do you get paid the same amount each time you get paid? If so, this is a lot easier. If your paycheck changes, use your lowest normal paycheck (don’t use a paycheck where you took a lot of time off or had some other anomaly that made the check lower than normal). Do you work in a field where you get paid tips? Deposit them into the bank. Tips will burn a hole in your pocket and make it harder to sick to your spending plan. Try to low-ball your tips when adding them into your income.
How often do you get paid? If you get paid each week, multiply your weekly net income by four. If you get paid every two weeks, multiply your pay by two. A few times a year, you will get an extra check one month, but if we can balance your budget without that extra check, we can use it to pump up your savings, pay down debt or do something fun. We’ll discuss that more in part III. If you own your own business, this is a bit more difficult. I use the average amount I have been able to pay myself in the last six months. My business fluctuates a lot during the year, so when business is good, I put the extra money in reserve so I can use that to supplement the slower months.
Figure out your monthly income. Now take some time to gather together your monthly expenses. We’ll work with them in parts II and III. Use your bank statements and receipts. If you use cash a lot, start carrying a small notebook to track what you are spending money on. This is going to be very important as we move forward.
I encourage your comments and questions. Please join the discussion.