Budget Planning

 

Most people can get by without budgets. They keep an eye on the checkbook, they know when they are going to get paid, and they know when the bills are due. Just write out the checks to keep the bill collectors off the phone, and everything will be all right, right?

Wrong!

Being in control of your financial situation is more than just paying bills. Of course, paying bills and paying them on time is essential. But there is so much more you can do!

Do you know how much you spend on groceries every week? Yeah, you probably could give a ballpark figure, give or take a few dollars. How about eating out? Probably not, and I bet it is more than you think. What if you keep track of that expense and the grocery bill and see how you pay for food each month? You could probably do better, and when I say do better, I mean save some money.

Saving money is the best reason to have a budget, especially in these days and times. Saving money also equals making money. Part of any good budget is setting aside a certain amount of money each month for savings. But before you do anything, you must write a diary of all your expenses for at least a few months. This will give you a good indication of where the money goes. You might be surprised.

 

Well, you wrote down everything you bought for two months, and now it is time to look at the figures. You probably already have, and they raised many questions. Like, do I really spend that much money on eating out? Do I spend that much on clothes each month? Is all this necessary?

The answers are yes, yes and yes. You spend that much. That’s why you don’t save money each month.

Now, get another sheet of paper (if you collected the data the old-fashioned way and wrote it down). Write down each category of expense as a heading. You might need another sheet of paper, or a spreadsheet would work a lot better. Under each heading, write down the two-month total.
Look at each heading and the number under it and think about how to reduce it. Cutting back on eating out should be easy. Well, maybe it won’t be that easy, but it needs to be done.

Utility bills can always be reduced by conservation, such as turning lights out and not wasting water. Keep the air conditioning at one temperature and the heat at the same. It's good for you and good for the environment.

Buying things on sale and using coupons can reduce the grocery bill each month.

Make a spreadsheet in Excel or Google. You don’t have to make the spreadsheet fancy. You could if you want, but one without the bells and whistles will do just fine.

Start in the second row and first column, and type in the name of your significant expense for the month. It is probably your rent or house payment. Go down the first column and put the name of each expense, going from biggest cost to least cost.


If you keep good records, it will be easy to copy them over to the spreadsheet. When you think you have everything typed in the first column, type Misc. as the last entry. There are always expenses that come up that you don’t expect. Whenever there is an unexpected expense, type it under Misc.

Now, across the top row, type in the days of the month. This will be your guide as to when to type in the expense. If your mortgage payment is due on the 5th day of the month and you pay it on the 5th, put in the expense that matches the 5th-day column and the mortgage row expense.


It's simple; follow that until the end of the month. To total your expenses, go to the Excel toolbar (or whatever spreadsheet you use) and find the autosum. Select the whole row of numbers (except the expense name) and drag it beyond the last day of the month. Click at the top of the page at autosum, and the total will be given. When you finish all the rows, drag all the numbers in the previous column, and you will find the grand total.


Under the grand total, type in how much income you had for the month. Do you have any money left over?

After a month, it should be relatively straightforward where all your money goes if you have kept up with your budget. Now is the time to set a number lower than what you have spent the first month of keeping track of your money.

You may think that some expenses are fixed, and you can’t really change them, like your mortgage or your car payment. But there are ways to change them. It takes time, but it will save you money.

With a mortgage, you can refinance if the mortgage rates are lower than what you are paying. Or you can use the extra money you will save from keeping a budget to pay down your principal.

Your car payment, like your mortgage, can be paid off quicker by paying the principal. In the future, you might reconsider buying any car that takes up a large sum of your monthly income.

By having a budget, you will build resistance to wastefulness and spending excesses. The reward will be saving money, money that you will need for unexpected expenses and retirement.