Budget. An estimate of income and expenditure for a set period of time. In simple terms, it’s a way to tell your money where to go so that you’ll know where it went.
Ever wonder where all the money went at the end of the month. If you’re like some, the question may rise the day after you receive a paycheck. It’s just not a great way to live.
So how do you take the boring out of budget? How do you create one you can live with? The answers to those questions are very simple yet by following the plan, the results will be tremendous.
First of all, let’s ditch the term budget. I like to call this my monthly financial master plan. Just like with other plans, it is subject to change. In fact there is a saying, “plans are made to be broken.” However, there is another phrase that I have heard throughout the years, “if you fail to plan, then you plan to fail.” With that in mind, if you want to win in your financial life, it is critical that you develop your monthly financial master plan, aka budget.
So how do you do that? What are the key steps?
There is no simpler way to answer that question except, in the words of a famous multi-national company, JUST DO IT!
Follow the tips below to get started on your Financial Master Plan (budget) today!
- Make a list of everything you need to pay each month – paying yourself first, mortgage/rent, insurance, day-care, gas, hair care, daycare expenses, cable, cell-phone, internet, everything!
- Once you have that down, average out the monthly cost for each item. You may wish to look at your banking history for the past three months to find an average.
- Next, determine how much steady income you receive each month. Unless absolutely necessary, I wouldn’t recommend adding child support to this number, especially if it’s inconsistent. The goal is to live off of what you make so if you do receive child support, its an added bonus that can go towards debt payoff then building an emergency fund. If you don’t, it won’t cripple your finances.
- If you get paid bi-weekly, decide how much you need to set aside from each check to cover the monthly cost. If you get paid once a month, you should be fine.
- I would highly recommend adding categories for sinking funds such as gifts, irregular expenses, car maintenance, etc. This will help you set aside cash so that when those bills arise, you have the cash to cover them.
- Next steps include actually making the budget. I like to use a spreadsheet that automatically calculates the numbers when I input formulas. Simply put, your income starts at the top, then each item you pay during the month gets subtracted from that number. It’s quite simple.
- If a spreadsheet is not your cup of tea, use a budget app to create one. There are tons of great ones out there and they can even link to your primary checking account.
- When doing your budget, try to tell every dollar where to go. Don’t leave anything to chance. Budget for everything so that nothing goes undocumented and no dollar is spent on a whim. In fact, create a line item for “fun” if you have any cash left after taking care of all of your savings and obligations. You earned it, so you should treat yourself to something each paycheck, even if it’s a small ice cream cone at the end of each month.
That’s it! Voila! This is a very simplified way to start your budget, but really, its all that is needed to get you started on the path to financial freedom. Don’t worry if you have to change some of your allocations or things don’t turn out as planned. In the words of Lau Tzu, “The journey of a million miles begins with one single step.” Get started on your budget today!
So what are some of your budgeting tips? Any successes? Failures? Join our Facebook group at SingleParent$aves to be connected to a community of super savers like yourself.
Happy saving, live well!