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Start a Simple Home Budget

Start a Simple Home Budget

07/01/2015 10:20 pm0 comments

A budget?   Yes it’s the dreaded “B” word of home finance management.   Most of us have probably tried to commit to a monthly budget at one time or another but it takes time and slowly can slip away until we are kind of keeping track of our finances “in our head,” or worse we are just hoping there is enough money in our bank account to cover one more purchase before the next paycheck gets deposited.  Keeping a monthly budget will help make sure you have enough money for things that all of a sudden come up like car repairs or house repairs.

I use a fairly simple excel spreadsheet for budgeting however just a single sheet of paper will work, too.  Here’s a few steps to follow for creating your budget:

  1. At the top of your budget write down your projected net income (how much you will actually take home) for the month.
  2. Next, write down all your expenses that will need to be paid during the month.
  3. Now subtract the total expenses from your projected net income.  This will tell you how much income you have left or still need after expenses are paid.
  4. Hopefully you still have some income left after paying expenses.
    • If so, then you will want to allocate that money to other items.  This could be things that you are saving for each month like a college fund, retirement, etc. or things that you need to be prepared for like car service/repairs and home repairs.  Keep allocating money to things until your income for the month reaches zero.   Once at zero then you will need to wait until the next months budget to add in other things.
    • If you were not able to pay all your expenses, then you will want to prioritize your expenses by paying for necessities first.  This would be food, clothing, mortgage, electricity, etc.  Once those are paid then draw a line under the last expense in your list you are able to pay.   Anything below that line won’t get paid in the month.   If you are in this situation then you will want to figure out a way to reduce your expenses (sell that expensive car) or get your income to increase (maybe a temporary second job).
Money and Graph

Image courtesy of jannoon028 at FreeDigitalPhotos.net

I realize there is much more complexity that can be added into a budget but that’s basically it for a very simple budget with the main idea being that you allocate every dollar of income during the month to something until your income is down to zero.   In future posts I will go into more detail.   This is just a starting point for those who do not currently have a monthly budget.   Here’s a few more things to note:

  1. First, be consistent.  At the beginning of each month set aside 1 hour and create your budget for the month.  It may take a little longer the first few times you create the budget but as you do, it will become fairly quick to do each month.
  2. If you have a spouse, it will make things much easier if you do the budget together or at least have both of you review the budget.   This will make sure you are both on the same page with what the money will be allocated to during the month.   If you’ve never had a serious monthly budget before then it can be hard to get it going the first couple months.   Just remember that each spouse has a say in the budget and that over time it will get easier.
  3. This isn’t rocket science.   Don’t over complicate it.   Doing this just makes it easier to come up with excuses why your budget is too hard and doesn’t work and ultimately why you aren’t making it a priority each month.  When getting started with it, just keep it simple.

In future posts I will go into more detail and provide more information about specific financial problems, like getting out of debt and long term financial planning.

Feel free to ask questions by posting a comment.  I will do my best to answer them.

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