If you're reading this blog, it's probably because you like saving money (or because you're one of my family members. One of the two.). I hate to break it to you, but a budget is CRUCIAL to saving money. I know, I know, I hate them, too. This will never be the most exciting thing that you do, but it may be the most important thing for your financial life. Money has a way of slipping through your fingers when each dollar does not have an assigned purpose. Here's a very painless way to start budgeting:
1) Write a budget every month- do not try to make one budget for a whole year. Some of your expenses are fixed and won't change from month to month (rent, insurance, etc.) but many things will change monthly. For example, in May I had to get an oil change and in June I will get a haircut. In June I will also need to have extra in the budget to get my dissertation bound. These are not fixed expenses, and if I used a yearly budget I would not have the money available.
2) Go grab your checkbook. You will use this to determine what your budget categories are and to take an average of what you spent in each category last year. Some suggested categories are housing, grocery, restaurant, entertainment, insurance, auto, clothing, medical, pet needs, gifts, savings/investments, miscellaneous, and debt. You will probably have more categories as you figure out where your funds go.
3) Use the IRS Withholding Calculator to determine what your tax responsibility will be.
4) Use an online budget calculator to give you a place to start. I like the Crown Financial calculator.
5) Print off your budget and tweak the categories and percentages until they work for you. Every dollar needs to have a "home" that it goes to. If you have extra money, it needs to go to your debt or to savings.
6) Decide if you want to use cash or if you're okay using checks. Cash is easier since you can put the assigned amount in an envelope and you can easily tell how much remains in that category. If you are diligent, checks/debit card can work for you as long as you carefully note how much is going out from each category.
7) Evaluate the budget at the end of the month. What worked and what did not? Keep these things in mind as you write your budget for the next month.
I admit that I have never been great at following a strict budget. I am determined to change this as I prepare to pay down my student loan debt. I don't want money being frittered away when it could go to my good friend Sallie Mae. Or to her cousin Citibank.
1) Write a budget every month- do not try to make one budget for a whole year. Some of your expenses are fixed and won't change from month to month (rent, insurance, etc.) but many things will change monthly. For example, in May I had to get an oil change and in June I will get a haircut. In June I will also need to have extra in the budget to get my dissertation bound. These are not fixed expenses, and if I used a yearly budget I would not have the money available.
2) Go grab your checkbook. You will use this to determine what your budget categories are and to take an average of what you spent in each category last year. Some suggested categories are housing, grocery, restaurant, entertainment, insurance, auto, clothing, medical, pet needs, gifts, savings/investments, miscellaneous, and debt. You will probably have more categories as you figure out where your funds go.
3) Use the IRS Withholding Calculator to determine what your tax responsibility will be.
4) Use an online budget calculator to give you a place to start. I like the Crown Financial calculator.
5) Print off your budget and tweak the categories and percentages until they work for you. Every dollar needs to have a "home" that it goes to. If you have extra money, it needs to go to your debt or to savings.
6) Decide if you want to use cash or if you're okay using checks. Cash is easier since you can put the assigned amount in an envelope and you can easily tell how much remains in that category. If you are diligent, checks/debit card can work for you as long as you carefully note how much is going out from each category.
7) Evaluate the budget at the end of the month. What worked and what did not? Keep these things in mind as you write your budget for the next month.
I admit that I have never been great at following a strict budget. I am determined to change this as I prepare to pay down my student loan debt. I don't want money being frittered away when it could go to my good friend Sallie Mae. Or to her cousin Citibank.
1 comment:
What? "one of the two"? Does this mean if I'm one of the family I'm not interested in saving money? hmmmm... Okay, so maybe the idea of budget makes me go all numb... but hey....
From a 'family member'...
Post a Comment