Most people can tell you what their monthly bills are, but after that many cannot tell you what they actually spend on living expenses and savings. But this is exactly the information you need to make a budget. So, how do you get started?
Begin by tracking your expenses. Every time you spend money, write it down. Do this for about three weeks. At the end of each week, total your spending.
The next step is to list all of the items you spend money on throughout the year. You can do this on your own, check out samples on the Internet, or email me at blison@gbdioc.org to request our Monthly Expense Worksheet. Your next step is to determine how much you spend on these items each year. When you have amounts for each item, divide that number by 12. That gives you the amount you need each month to cover those expenses.
Some items on your list such as car repairs and vacations happen sporadically, and these are things you need to save for each month. Other items that are fixed, such as rent or mortgage and loans, you can pay for monthly by check or money order. The last category is things you should pay for with cash: groceries, entertainment, gas, etc.
While the media continues to promote debit/credit cards and checkbooks, studies show that using them results in increased spending of 30% or more. We are simply thriftier when we use cash!
You’re now ready to develop your budget. It should cover one pay period at a time and shouldn’t project out too far. Again, there are a variety of templates available. We have one that divides the budget into cash categories, bills to be paid and savings.
I’ve used my budget for 11 years now and it has enabled my family to do things that would have been impossible otherwise. I hope your family can share our experience of a greater sense of peace and financial well-being through budgeting!