Budgeting

Feb. 20, 2010
Budget Part 1

If you look up “budget” in the dictionary or online, you will get a million definitions.  The one I like the most and that fits the purpose of our life and blog, is one from thefreedictionary.com

Budget:  An estimate of income and a plan for domestic expenditure of an individual or a family, often over a short period, such as a month or week.

In other words, a plan for your family’s income and use of that money.  Don’t get scared.  Believe it or not, math is my enemy.  I despise it, hence, I teach reading!  Lucky for me, I married someone who loves math and has helped me understand some of it’s concepts a bit.

One thing about math that I do “get” is family budgeting.  I actually enjoy working on our buget.  I guess it’s because I am data driven and love a good challenge.  There is nothing more challenging than stretching your money!  I understand how scary the word budget can be for some people.

So, my goal is to make this topic a bit more user friendly. Also, I hope to help you realize the relief that comes with having a family budget and doing your best to stick to it (nobody is perfect and you will slip up, the important thing is to keep trying).

Our family’s budget serves a variety of uses for us:
1.  It gives us a starting point to begin each month.
2.  It gives us a goal to meet.
3.  It keeps any unneeded spending to a min.
4.  It keeps us accountable to each other as a family.
5.  It helps me be a stay at home mommy.

Where to start?
Basically you need to find out where your money is going each month.
1.  Start off with the money you bring in (your income).
2.  Write down your fixed expenses (oh no! Not a financial term!?!).  Relax, this just means to write down all of your bills that are the same each month such as rent, car payment, etc).  If you feel like using software for this, there are a variety of budgeting programs available.
3.  Write down your variable expenses (breathe). This means to write down bills you owe that change each month such as credit card bills, utilities (power, water, etc).
4.  Find your surplus or deficit (think happy thoughts).  This means find out what you have left over each month after bills and expenses (good for you if you have a surplus) or what you are lacking (deficit, hey, it happens…)

If you have difficulties working these numbers out on your own, check out these sites for free resources:
http://financialplan.about.com/cs/budgeting/l/blbudget.htm
http://www.betterbudgeting.com/budgetformsfree.htm
http://www.free-financial-advice.net/budget.html
http://www.christianpf.com/

March 2, 2010
Budget Part 2

In “Budget Part 1″, I talked about what a budget is, how our family uses the budget, and a starting place for you to begin creating your budget. In part 2, my goal is to help you begin to make a plan based on your findings.

Making a plan
After you have figured out where your money goes each month, how much you have left over, or how much you lack to cover your costs, it’s time to make a plan.

1. If you find that your income is not enough to cover your costs, then you need to cut costs. You may ask, “How?”. Begin by making a list of absolute needs (housing, electricity, water, clothes, and food). Then look at what remains on your expenses list and start cutting. This may hurt, in fact, it probably will, but you have no choice if you are living beyond your needs. Magazine subscriptions, gym memberships, daily trips to get coffee, and going out to eat are NOT absolute needs.
2. If you have enough income to cover your expenses, but money is still “tight”, then ask yourself the hard question, “What am I spending money on that is not a NEED?” and then make some goals from there.

The goals you make will obviously vary depending on your individual situation. As I have stated before, our main goal right now is for me to be at home with our son; so, our goals are to not only cut out unnecessary expenses, but to also trim down our food costs, electricity, and water. Basically to cut EVERYTHING we possible can. It’s not always fun, but it’s our goal.

If things just seem too overwhelming right now, don’t worry. Take a deep breath and if need be, sleep on it. When you revisit the situation, be sure to be well rested and not hungry. If you feel you need a bit more guidance on making goals (whether short or long term) I recommend reading about Dave Ramsey’s plan found HERE. His 7 “Baby Steps” really aided us in our budget planning.