{Budgeting your family’s money, part II}

{photo credit}

This post is a continuation of part I, which is part of my mini-series on budgeting.

“You can do anything you put your mind to.”

Do you believe that phrase? I was reading a blog that was hosting a recent Gussy giveaway, and the author wrote about Gussy:

The short version of her story is this: She decided that she wanted to sew, so she learned. Then she decided that she wanted to make it a full-time job, so she made it happen.

I guess when you get down to the point that’s exactly my story, however it’s the very short version. It’s also the simple version :]

If you had the opportunity to put on a shield of braveness, what would you “put your mind to”?

On Sunday I asked you to think of something you’d like to achieve financially. This can range from a simple goal — personally or professionally, or something serious like funding 3-6 months of your income as an emergency fund. The goal is totally up to you, and I’m already excited for you and what’s to come.

Keep in mind the freedom that you experience when you’re in charge of your money. If you don’t already work off a budget, I hope you’re now encouraged to start! Don’t think about the debt you have currently, think about what you’re going to accomplish by building a budget.

Focus on the long-term benefits of serving God vs serving money…

Luke 16:13 (NIV)
No servant can serve two masters. Either he will hate the one and love the other, or he will be devoted to the one and despise the other. You cannot serve both God and Money.

Getting started: know your numbers

This part is easy! Simply gather all incoming & outgoing expenses and organize them by type {in or out}. Be sure to think of your 401(k), insurance premiums, money allotted to savings each month, etc. as these are expenses, too, but may not arrive in the mail {or even monthly} like a typical bill.

For Zack and I, it’s easier to make a list of all incoming & outgoing expenses bi-monthly because Zack is salaried. You can also do this every two weeks if that’s how you are paid, by the month as a whole, or however your income is most easily broken down.

* side note A: One super easy way Zack and I track all expenses is to use Google Calendar and schedule our bills as an “event” one week before they are due. It’s a yucky “event” to add to the calendar, but I’d rather be informed than surprised when it comes to our money/finances. Google Calendar also lets you share calendars with other Gmail users, so Zack and I can both see our bills.

If you have Gmail, Google Calendar is already available to you. You can always buy a cute calendar from my sweet friend Emmy with Much Ado About You to track your expenses manually {REMEMBER TO PAY WITH CASH & FROM YOUR “FUN” SPENDING ACCOUNT :] }

* side note B: If you use a calendar {of any kind} to track your bills, remember to read over the past few months to make sure you don’t miss something that is a once-a-year or quarterly, etc. bill.

Here’s what you do:

1. Decide how you’re going to break down your expenses/income, then write down all expenses & income that fall into your preferred time frame {twice a month, every two weeks, etc.}

– For example, we use the 1st-14th and the 15th-30th for our time frames. We create a column for expenses and a column for income. When all of this information is gathered on one sheet of paper a person can more easily grasp an entire month’s cash flow.
– When your expense/income columns are complete, add them each of them up by type {expense, income} and write down each type’s total.
– Here’s a sample of organizing your family budget into a monthly time frame. Please read it over a few times to get a clear understanding of what I’m describing for your budget.

2. Don’t forget about the “other” expenses:
* Groceries/Necessities
* Gas/Auto
* Medical/Rx
* Entertainment/fun {you MUST include this in your budget, no matter the amount listed. I’ll explain later.}
* Savings

– This “other” expense column may create an additional column on your month-at-a-glance expense/income sheet, but that is OK.

– By organizing our expenses and income into 2 monthly time frames we’re able to see on a more realistic basis if we can pay the bills that fall into each specific time frame with the income we receive in that same time frame.

– If you find out you aren’t able to then you know you need to find money from another paycheck time frame to supplement that specific section of bills {expenses}.

– Take a minute to think about even more random, silly purchases you made over the last few months…

– At this point we have our expenses organized for the first half of the month, our income for the first half; our expenses for the second half, and our income for the second half.

3. You’re almost done!!! The final task in creating your budget is to add up all income, all expenses and find a balance.

The goal is to balance out at $0

No, I don’t want you to be broke, but I do want you to tell every single dollar you own where to go. If you don’t tell your money where to go then it will be in control. Once all your bills are paid {including adding to your savings account monthly}, if you see you have money left over you need to tell it where to go. Whether you want to spend a quarter of your income on entertainment, or elsewhere, it’s important you put that amount in that category.

Here’s a thought: If you have money left over each month you could add it to your monthly savings {may be used for debt or general savings, etc.}, but remember to rework your numbers so your balance is at $0. If your balance is negative then you need to go through and re-work your numbers. Or get a second job. And don’t hate me for typing that.

Remember that entertainment expense listed in “other”? That amount should always be the first expense you reduce if you are in the negative, but it’s SO IMPORTANT you don’t reduce it to zero. You NEED to have some spending money. If you don’t have anything allotted in this category then you’ll end up spending way more than you originally budgeted for/can afford and your budget will burst.

Burst = not good.

{photo credit}

Writing the budget was the easy part… Here’s the hard part:

You must, must, must put your budget in action and stick to it! Most bills are monthly and consistent. Other bills, such as groceries/necessities, gas, medical, can fluctuate and can be hard to predict. Do your very best to come up with a solid, reasonable number/average for these bills and stick to them. If something goes haywire you can always pull from your savings account, but remember to put it back later!

But I don’t have a savings account!!!
Yes, you do. Remember one of your “expenses” above was to put money monthly towards savings?

You’re welcome.

3 tips to sticking to your budget:

1. Check on it often — are you on-track? Does your budget allow you to succeed or do you need to adjust it?
2. Remember that your budget is your friend but non-budgeted money is NOT your friend
3. Make sure you are saving! By watching your savings account grow you should be continuously encouraged to press on.

Tip: For the expenses that you purchase multiple times a month {like fuel, groceries}, keep a running total of what you’ve spent each time, leading up to your maximum monthly total. Let me explain…

This is another great way to help yourself stay within your budget. Use a simple chart like this to keep track of expenses you pay each month, like groceries, to make sure you’re not over spending.

Remember:
* Inconsistent monthly expenses can be “found” by dividing the total yearly amount by 12.

* If you don’t know an amount, make your best educated guess and adjust as you learn more, even if this means adjusting your budget every month.

* DO NOT let this overwhelm you. Don’t focus on every single dollar; focus on the bigger picture, which is not going into debt and growing your savings account. If you find your budget is off, sit down and re-work it. And when your done, think to yourself, Gussy is super proud of me.

* Maybe you aren’t able to save much because you have a lot of past debt to pay off? Please read Total Money Makeover. Dave Ramsey has a great debt-free plan, called Debt Snowball, that you’ll read about in the book. This plan teaches you how to put money each month towards minimum payments with the idea that when you pay off one debt you use that minimum payment amount and put it towards your next debt. It’s fabulous, but you must read the book! Dave explains it in much greater detail than Gussy does :]

* Use cash. This one is huge and the only way you’ll move forward with your budget. If for some reason you aren’t able to pay your bills with cash from your income, you may need to consider finding supplemental help. There should be programs within your state or county to assist you. When you continue to use credit you’re treading backwards on a one-way street. It’s nearly impossible to succeed with credit and the point of a budget is encouragement, education & success.

Questions?

Leave a comment!

Up next: {Budgeting your business’ money, part I}