How to create a budget by SimplicityInTheLBC

It took me

3 months

It made me

more in control!

"Having a plan makes life seem much less daunting."

How I did it: I started by keeping track of my expenditures for a month.  Bought an office spike and spiked every. single. receipt.  Kept myself honest by double-checking against my debit card statement.  Was appalled by how much money I spend on fast food...no wonder another goal of mine is to lose 30 lbs.

Then, after I had an idea of where my money was going every month, I made a spreadsheet.  I started with my monthly income at the top (I have several jobs, so each one got its own line).  Skip two spaces, and start filling in amounts for NECESSITIES that don't change from month to month: rent/mortgage, car payment, insurance(s), gasoline/transit cost, daycare, etc.  Skip a space, and fill in average amounts for necessities that change month to month: utilities, groceries, etc.  Add up those two amounts, and if they're already more than you make in a month, DO NOT PASS GO, DO NOT COLLECT $200.  Go figure out where you can make cuts or earn more.

Hopefully, you're not in that situation.  A good rule of thumb is to take 10% of however much is left over and put it into savings every month.  Or maybe a set dollar amount works for you, like $50 from every paycheck if you get paid multiple times in a month.  But you MUST put money in savings, because if you lose your job or your car falls apart, putting expenses on your credit card is a fast ticket to debt hell.

So now that you have an amount set aside for savings, make a few categories of incidental stuff that you spend money on: eating out, manicures, drinks with the guys, concerts, bellydancing lessons, and so on.  Then decide how much you want to allot to each section each month from the money that you have left over after paying your necessities and your savings account.  It may not be much, so you'll probably have to ration it.  If you want to go to a concert with tickets at $60 a pop, you may have to forgo eating out that month, or cancel your gym membership and go jogging instead.

Lessons & tips: Budgeting is a lot easier when you know exactly how much you have coming in every month.  If you're an independent contractor, try keeping track of your income for 6 months instead, so you can get a better average.  And if you're an independent contractor, the SAVINGS part is totally non-negotiable, since you may have no idea when your next gig is coming in.

If you struggle to make ends meet every month, start looking for ways to increase your income or reduce your expenses every month.  If you live alone, consider getting a roommate (I know, suck, but it cuts your rent in half!).  Ditch the gym membership you don't use.  Get rid of your cable company (or just threaten to, and they may cut you a sweet deal to keep you as a customer).  

If you've already reduced back to bare bones, you may have to consider getting a second job or finding work that you can do part-time.  Selling old stuff on Ebay, babysitting/nannying, taking tickets in the evening at the local cinema, doing seasonal work at a local department store -- no, it's probably not what you want to do for a career, but think about it this way: if you make $8 an hour and work a second job only three days a week for six hours a day, that's an extra $400 in yo' pocket  every month!

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May 25, 2011, 08:45PM PDT | 0 comments | 13 cheers

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