Budgeting 101 – 5 Steps To Making and Staying On Budget
Welcome to the Coupon Dad Budgeting 101 – 5 Steps To Making and Staying On Budget Class. We have been asked many times, “how do you make a budget?”. Well, here it is.
No matter if you earn $50 per year or $50 million, everyone needs to operate within a budget. First of all, lets clarify something. Just because you budget, does not mean you are poor. It means you are smart! The purpose of a budget is to prepare yourself. There are other benefits, but that is the main purpose! Think about it… wouldn’t it be great to not stress about the holidays, a car maintenance bill, or the fact that your washing machine is on the brink? That’s what budgeting will do for you. Let’s get started.
1. Make A List Of All Your Expenses
This will not be a five minute task. When I say make a list for all of your expenses, I mean make a list of all your expenses…. for the whole year! Be sure to include charitable donations, gifts, hair cuts, car registration, dining out, travel, kid’s allowance, gym memberships, entertainment, clothing, groceries, transportation, insurance premiums, cable, utilities… everything. I would even suggest looking at your bank statements from last year so you can remember everything you spent money on. We each have our own personal budgets too. Zack has a wine budget and I have a “girly stuff” budget. Those are important!
2. Make Your Buckets
This is the annual budget spreadsheet that we use. It is an Excel spreadsheet and all the formulas have been done for you.
Here’s the hard part. If you are married or otherwise committed, you will want to do this together. At this point, I’d like you to read our 6 Ways To Never Fight About Money With Your Spouse Again!!… go ahead I’ll wait…. Are we together on this??? Good. This where you will discuss and plead your case about where the money goes. Here’s the fun part. There are certain things that you don’t pay for every month. You many only pay for them every couple of months or once per year like car registration, birthdays, anniversaries, Christmas gifts, back to school shopping, oil changes, new tires, house repairs…. you get the idea. You are also going to agree on an amount for those items too. Don’t be unrealistic here. If you have a family of 6, there is no way you are going to spend $200 a month on groceries. If you are contemplating a new car, put it the budget. Enter all of your wants and needs. Look at the bottom line. If the bottom line meets all your wants and needs and your salary can pay for it, great! However, if your budget is more than you are earning, then you will be making budget cuts. This isn’t Congress. We live in the real world! Also, we break down clothing budgets, hair cuts, and such so that each of us have our own buckets of money. That way it prevents 1 person from consuming the majority of the funds and when a person has spent all of theirs they are done.
This process may take a couple of days, especially if you have never budgeted to this extent before. However, next year will be much easier because you can just transfer info!
3. Divide and Conqueror
That was tough, I know, but you did it! Give yourself a hand! Now it’s time to conqueror those big, expenses. A big one for us is back to school. With 4 kids, the clothes, fees, sports, supplies, it’s huge. By the time is said in done, it’s usually around $1000. I know I have from January till August to save the $1000. So for the months of January till August I am going to budget $125 for back to school then in September, October, November, and December I am going to put $84 in my back to school budget. Why $84 in the last 4 months? If I do this, it will carry over into next year and I have made a savings just by budgeting. It also lessens my monthly expenses next year because I planned ahead! You can do that with Christmas, birthdays… everything. It’s grand!! I know for your kids you can’t, but what if you didn’t buy any clothes for a whole year and budgeted $50 per month in your personal clothing budget. You would then have $600 to go buy clothes. When you have funding, it frees you up to buy when things are on sale and at better prices so you get more for your money!
4. Track What You Spend
We use what we call the monthly expense tracker. When I say, “track what you spend”, I mean keep track of every dime you spend. If you go through Sonic at Happy Hour and get a $.99 drink, keep track of it. Why is that important? Think about. Each of those $.99 add up. If you go every day for a month that’s $30. Everyday all year, you have spent over $350 that was unaccounted.
5. Stay On Budget
You can’t predict every expense. Things happen to us all. When you go over budget, you have to make up for it from another budget. For instance, if I go over budget on groceries then I know that going to come out of my dining out budget. If we go over on our gasoline budget, then that comes out of the entertainment budget. You get the idea.
There you have it. 5 ways to make and stay on budget. Let us know if you have any questions. We will be glad to help!