Budget sounds like a dirty word. Like a diet for your wallet. Full of deprivation and denial, followed by guilt-ridden binges, and then back on the wagon for more deprivation.
Blech!
For most of my life, I carried that image around in my head, eschewing money management until it was nearly too late. But eventually, I got the message that I needed to take responsibility for my finances.
What followed was a search for the best method/app/printable that would help me get my financial situation back on track. But I quickly found myself overwhelmed. I tried Mint and You Need a Budget, but found both difficult to keep up with. These apps needed constant input and didn’t always update quickly, leaving me scurrying for a pen and paper to figure out if I’d messed up. (Both, by the way, are good systems that work for a lot of people, just not me.)
Add in the fact that I was trying to manage my expenditures and my husband’s on an inconsistent income, and I was soon frustrated and ready to quit. I tried printables, but it was the same. I appreciated the detail that many creators put into their budget packets, but I felt like a lot of them didn’t align with my expenses and income.
Balancing my checkbook with a pen and calculator was starting to sound more and more appealing, if archaic.
[Disclaimer: This post may contain affiliate links. Please see below for more details]
It was after reading Mary Hunt’s How To Debt-Proof Your Marriage and Dave Ramsey’s Total Money Makeover that I started to develop the idea of a spending plan. First off, the name sounds much more appealing than budget. It was also very accurate.
Money management, at least for the basic family, doesn’t have to be complicated. You just need to plan how you are going to spend your money. In other words, you need to know where your money is going.
One of the saddest things about money is when you put all that time and effort into earning it, only to lose it in places you never intended — like a mouse making off with your cheddar while your back is turned.
So, how do you stop that from happening? With a spending plan, of course.
If, like me, you find yourself overwhelmed by all the different budgeting options out there, keeping it simple is essential. Even the most basic plan is better than no plan at all. So feel free to embellish these guidelines as much or as little as you like. They are deliberately broad to give you the opportunity to change things to better suit your unique circumstances.
Here we go…
First, make a list of your bills. This includes the ones you pay each month, each quarter, and each year. Any living expense that you pay on a regular basis and is usually a set amount.
Now, make your best estimate about your irregular expenses. This would be things that fluctuate, like groceries, gas for the car, clothing purchases, and special occasion expenditures.
With those things listed, it’s time to figure out the last two categories: Saving and Giving. While these amounts are a private matter, they are still very important. I believe in determining them by percentage of income, say 10% each, and here’s why.
Percentages keep me from taking from these two categories to fulfill another. It’s too tempting to skip a savings deposit to buy an extra pair of jeans or to put money toward a credit card balance. It may seem right at the time, but the effects add up.
Now that we have all of our categories, let’s plug them into a simple formula (ah, you knew math was going to be here somewhere):
Income – Bills – Irregular expenses – Savings – Giving = Spending plan
Every week, I sit down with my list of expenses and work out the answer to this equation. I do this because things can change on a weekly (and daily) basis so they often need to be tweaked, especially because my husband gets paid a variable amount each week. This offers a little bit of an extra challenge, but it’s not insurmountable as long as we are flexible and ready to adjust where needed.
What do you do when you have a big expense coming?
We all have those big expenditures that pop up once or twice a year, like the car insurance bill. You can pay it monthly, but you save more by paying it all at once. But that’s still a hefty chunk of change. So, what you can do is set aside a portion of it each month like you would any other expense or bill, and when it comes due, you have the full amount ready, without putting yourself in a bind.
Where does debt pay-off fit in?
Debts can be a part of your regular bills (e.g. your minimum payment is $50, but you decide to pay $75 each month to pay the balance down) or you can use what is left after you fulfill the other categories to pay off your debt (e.g. you have $80 left over from your paycheck and decide to send it to your credit card company).
What about the FUN?!
Good point. We all need some fun in our lives, no matter what our financial situation is. But how much that fun costs is up to you. The money that is left over after the essential expense categories are satisfied leaves you with some options. You could pay down debt even faster, splurge a little, save or give more, or you can put it aside to fund something big, like a family vacation or anniversary cruise. It’s up to you.
*If you find yourself in the negative after paying for your basic categories, then something has to give. While the first inclination would be to skip on the savings or giving categories, that’s not the real problem. The issue is that you are living beyond your means, and you are going to have to make some hard choices about what is really important and what isn’t. Check out this post for more on this.*
Now you’ve got yourself a spending plan. I hope it gives you some help and guidance on how to get a handle on your finances in a simple and intuitive way. Sometimes, we just need a place to start.
How do you budget or plan your spending? Do you have any go-tos that help you manage your money? I’d love to hear about your spending plan in the comments!
[Disclaimer: I am a participant in the Amazon Services LLC Associates Program, an affiliate advertising program designed to provide a means for me to earn fees by linking to Amazon.com and affiliated sites. This post contains affiliate links, which means that if you click on one of the product links, I’ll receive a commission, at no additional cost to you. All opinions are my own and I never recommend anything I haven’t used myself and loved.]
Leave a Reply