stretchingcents

How to start budgeting pt. 2

on January 19, 2012

Once you have tracked your spending for a little while, you should have a rough idea of how much you spend each month, and some basic categories for where you spend your money.  I have found using Excel is an easy way to keep your budget organized, but this month I am testing out Mint.com.  So far I’m having trouble getting it to do everything I want, but I think once I get used to the site it will make things easier.

Tonight I’m going to give some suggestions for getting your categories together, and what working budget form looks like.  Everything I know about budgeting has come from either trial and error, or Dave Ramsey.

Suggested Categories and goal % of income:

  1. Church/Giving: 10-15%  Take your monthly income and multiply it by 0.1 or 0.15.  This should be your target amount for giving.  If you aren’t there yet, remember this can just be a goal.  Some thoughts on how we feel about this category.
    • “Every good gift and every perfect gift is from above, and comes down from the Father of lights, with whom there is no variation or shadow of turning.”  James 1:17  Since everything we have been given is a gift from God, it is not ours to start with.  “Give, and it will be given to you: good measure, pressed down, shaken together, and running over will be put into your bosom. For with the same measure that you use, it will be measured back to you.”” Luke 6:38 Generous giving will result in a great reward from God.  The bible also says: “On the first day of the week let each one of you lay something aside, storing up as he may prosper, that there be no collections when I come.” 1 Corinthians 16:2.  So because our money comes from God it is not ours and we need to give to others.  This giving must also be planned and done early.
  2. Savings: 5-10%. Take your monthly income and multiply it by 0.05 or 0.10.  Dave recommends doing whatever you need to do to get $1000 in savings.  We also set up a sort of escrow account for ourselves where we save each month for big events we know will happen throughout the year like Christmas, vacation, car tax, and for other things we feel are highly likely to happen in the near future like needing a new oven.  I’ll explain how to break up your savings in a later post.  We have found the importance of saving over and over again!  After Zack’s first knee surgery we knew he would be out of work for awhile and we would have medical bills.  When we did the math, it wasn’t going to add up.   This is when we learned to be super frugal so things would add up and that we needed to be better about saving our money.  Good thing we learned our lesson too because after another knee surgery, a tree on the house (hence the picture at the top), a new septic tank and a baby we realized how amazing it is not to have to stress about money when everything else is in chaos.
  3. Housing: 25-35%: Take your monthly income and multiply it by 0.25-0.35.  This category  includes things such as rent/mortgage, repairs, property taxes, homeowner’s insurance and even furniture.
  4. Bills: 15%.  Take your monthly income and multiply it by 0.15.  There are two types of bills: Unavoidable (Rent, Mortgage, Electric, Insurance etc.) and Optional (cable, Netflix, etc.)  For now group all the bills together, but later you may need to decide if all are really necessary.  For this category we have: Electricity, Water, Gas, Phone, Internet, Cable, Trash, Netflix, Life Insurance, School loans, and cell phone.
  5. Food: 5% Take your monthly income and multiply it by 0.05.  We separate this category into groceries and eating out.  For most people this is where you tend to overspend the most.
  6. Clothing: 5% Take your monthly income and multiply it by 0.05.  This is a category where you will probably not spend the full amount each month, but you will want to save this amount so when you need clothes you have the money to buy them.
  7. Medical: 5%  Take your monthly income and multiply it by 0.05.  Just like with clothes, you will want to save any extra money for later.

In order to figure out the remaining categories, you need to see how much money you have left.  Take your total income and subtract the amount you have budgeted so far.  This is how much you have left to spend on everything else.  Divide this amount into your remaining categories based on how much you spend each month.  Our other categories are:

  • Pet
  • Car- gas, tax, and repairs
  • School- books, and whatever else I need for the classroom
  • Baby- babysitter, diapers, food etc.
  • One time- seems like every month there is something unusual that happens
  • Other- for everything else.

If you find you don’t have enough money to cover everything, start looking for things that are “wants” and not “needs”.

Here is a sample budget form from Dave Ramsey’s website.  If you would like one already in excel, you can email me at zackandcarrie@gmail.com and I’ll send you one along with instructions on how to make the spreadsheet do all the math for you.


 

 

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