If I sat down and wrote out a budget once I must have done it a thousand times. Every time I thought I had it figured out something would come up, kid’s needing shoes, fix something on the car, you know what I’m talking about.
It was slow coming but I finally realized that there had be a way to plan for the unexpected. I tried several ways.
The first was to keep a little cash on hand at the house. That party was doomed from day one. Then there was setting it aside in my checking account. Doomed again.
That’s kind of a long, dull story to get to my point which is that “I just didn’t have a plan”. The bills were on one side of the paper and my income was on the other, but that’s as far as it went.
To develop a thorough budget plan, you need to use percentages of your income for your bills. Don’t try to make this too complicated. Keep it simple. Here’s an example:
HOUSING – 30% = HOUSEPAYMENT OR RENT, TAXES, INSURANCE
HOUSEHOLD – 30% = EVERYTHING YOU SPEND MONEY ON BETWEEN PAYDAYS (GROCERIES, GAS, SCHOOL LUNCHES, AND DON’T FORGET YOUR POCKET
MONEY) TAKE YOUR TIME WITH THIS ONE.
OTHER BILLS – 30% = CREDIT CARDS, ELECTRICITY, PHONE BILL, ETC.
SAVINGS AND CRISIS FUND – 10% = YOUR LONG AND SHORT TERM SAVINGS (SHORT TERM SAVINGS WOULD BE USED TO FIX THE CAR, BUY A NEW TV, ETC.)(LONG TERM SAVINGS IS FOR THINGS LIKE BUYING A HOUSE, COLLEGE FOR THE KIDS, ETC.)
One of the most important points to making and keeping a budget is to use cash for your household expenses and use the bank for the bills and savings. Stay well away from the ATM because it causes money to turn to a fine mist, disappearing into thin air time and time again.
The short term savings or crisis fund as I call it, is the key to making your budget work. A lot of what we use credit cards for can be bought using the crisis fund. If we sat down and added up the interest, late fees and penalties we pay on credit cards, most of us could buy a house full of furniture with that much money.
Write your bills on a piece of paper. Then put them in the category’s listed above (Housing, Household, Other bills and savings and crisis fund).
Next figure your monthly income. This is your take-home pay. HINT: For those of you that get paid weekly multiply by 4. If you get paid every two weeks multiply by 2. About every 3 or 4 months you will have an extra paycheck, but don’t count that. I’ll explain later.
Compute your percentages. Example: If your income is $2000 per month and your house payment, taxes and insurance comes to $600 per month, then $600 divided by $2000 equals 30%. Do this for all the categories of your budget.
Now the fun begins. What if my income is $2000 and my house payment is $750 per month? That’s 37.5%. What do I do? Don’t panic, just compute the other categories. They may be less that the target percentage. If they aren’t less, still don’t panic. There are ways to bring these things in line.
Look at how all of your percentages compare to the target percentages above. If you are at or under 100% you are still OK. If it comes out to over 100%, then some adjustments need to be made.
If you are over 100% look at which category goes over the target percentage. I’ll bet it’s other bills. That is where the vast majority of us have our biggest downfall. But the good news is that this category is the one we have the most control of.
There are hundreds of ways to cut a little from your electric bill, phone bill, credit card debt, installment loans, etc. Way too many to list here. We will be covering many of them in the coming months.
Before I forget, let me give you some ideas of what to do with that extra paycheck that I mentioned before. HAVE SOME FUN. After sticking to a budget for 3 or 4 months, you deserve it.
Now for a few tips to make that cash last til payday.
1. Discipline, discipline, discipline. If you have the discipline to get up in the morning and go to work, or get a house full of kids off to school or what ever your routine is, then you already have the discipline to manage your money. Just work at applying it.
2. Try paying yourself two or three times between paydays. This doesn’t work well for the groceries. Usually buying your groceries in one trip saves money. But after you buy the groceries and fill the car up then divide the money in two or three parts and set a given day to get more. If your paid weekly on Friday, then Tuesday of the next week is a good day.
3. Build some enjoyment into your plan. Allow money for a pizza night or movies. Budgets that are all work, don’t work.
4. Be aware every time you spend money that there are necessary items that have to be bought before you get paid again.
5. If you are married, work closely with your spouse on making your money last til next payday. This alone can make it or break it.
Now for the answer to the question in the topic of this article, Yes it’s not only possible, but likely when you focus hard on not spending money out of a habitual response to some external stimulus, but from a state of complete awareness of whether it is necessary. Plus, it’s really nice to have a few dollars left over when the next paycheck comes in.