How To Set Up A Budget Plan

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SETTING UP A BUDGET


Setting up a budget is really frightening to some people but once you get the hang of it, you simply won't know why you didn't do this sooner!

The most important aspect to consider in having a budget is knowing how much you're bringing in and how much you're spending across the board. 

Sometimes the areas are easier to discern such as mortgage or rent.  Those costs are fixed, right? so that's a no-brainer. 

But then when you have utilities that might fluctuate from month to month, or phone bills that can go up or down....or entertainment expenses that you just don't know where the money gets away from you on.....or those new shoes you just HAD to have and you didn't plan on buying.....

All these little things that crop up in a month or in several months are the budget breakers. 

Every time you reach for your credit card knowing full well that you are getting deeper and deeper into debt that you know you can't possibly pay off in a month's time let alone a year's time is the reason budgets were invented.....to stop this kind of spending behavior and get you back to solvent which where you WANT to be. 

I think all of us at some point in our lives have been there and done that.  I had my experience as a young woman starting out and ever since, I've hated even thinking about not living on a budget.

All this said, let's look at a simple budget and see what you need to categorize. 

No matter if you use a pencil and paper, a high-tech budgeting program (there are gazillions that are totally free), or if you set up the envelope system recommended by Dave Ramsey....even if you get out an abacus and a calculator and start adding things up and posting sticky notes....set up a budget and then make it work for you. 

Know how to make it work by tweaking it to your specific spending styles and your personality.  Not everything will work for everyone but you can make your budget work for you!


HOW TO SET UP A BUDGET YOU CAN LIVE WITH

In order to have a budget you must have income so set that up first.

INCOME CATEGORIES (include those applicable in all categories)

INCOME
 
Wages
 
Bonuses
 
Commissions
 
Interest income
 
Investment income
 
Rental income
 
Miscellaneous (hubpages.com)
 
INCOME SUBTOTAL_________
 


Next, start putting together your expense categories.

You'll notice that you have many more expense categories (probably) than income categories!

EXPENSE CATEGORIES

TAXES
 
 
Federal income tax
 
 
State and local taxes
 
 
Social Security/Medicare
 
 
TAX SUBTOTAL _________
 
 
HOME EXPENSES
UTILITIES
FOOD
Mortgage or rent
Water and sewer
Groceries
Renter's or homeowner's insurance
Electricity
Snacks
Property taxes
Natural gas or oil
Lunches
Home repairs
Land line telephone
Eating out
Homeowner's association dues
Cell phone
 
Home maintenance
 
 
Home improvement
 
 
TOTAL HOME ________
TOTAL UTILITIES_______
TOTAL FOOD ________
FAMILY EXPENSES
HEALTH/DENTAL
TRANSPORTATION
Alimony
Health insurance
Car loan
Child support
Dental insurance
Car lease
Daycare
Vision insurance
Gas and oil
Babysitting
Copays for insurance
Repairs
Elder care
Massage
Maintenance
 
Chiropractic care not covered
Car insurance
 
Yoga/swim aerobics
Bus, subway or taxis
TOTAL FAMILY _______
TOTAL HEALTH _______
TOTAL TRANSPO _______
DEBT EXPENSES
RECREATION/ENTERTAINMENT
PETS
Credit cards
Cable TV
Pet food
Student loan
Videos
Grooming
Home equity loan
Computer
Boarding
Other loan
Hobbies
Vet costs acute
 
Subscriptions
Maintenance
 
Club dues
Toys
 
Vacation
 
TOTAL DEBT _______
TOTAL RECREATION _______
TOTAL PETS _____
CLOTHING EXPENSES
SAVINGS/INVESTMENTS
MISCELLANEOUS
Fall
401(k) or IRA
Toiletries
Winter
Stocks/mutual funds/bonds
Household products
Spring
College fund
Hair products
Summer
Savings account
Cosmetics
Shoes & accessories
Emergency fund
Beauty treatments
 
 
Anything else
TOTAL CLOTHING _______
TOTAL SAVINGS _______
TOTAL MISC _______


The differences between your income sheet and your expense sheets is your spendable income.

You can also make columns for your monthly budgeted (anticipated amount) and your actual monthly amount spent for a period of time to see how on target your budget is.

Compare the difference to see how it truly shakes out in terms of numbers.


HOW TO MAKE A BUDGET WORK

Add up all your monthly expenses and investments and then deduct from your income and you will have your useable monthly income.

It's important to note what is coming in and what is going out.

The best way to track this is to keep a little notebook and jot down for a month or so every single thing you purchase and how.

You'll find out more about your spending habits and by doing that, you might see patterns you need to keep or patterns you need to change.

Then begin budgeting in projected amounts for the month and what the expenses are actually costing you.

You'll get a feel for the differences pretty quickly and then make adjustments appropriately.

One factor to consider is that if your job is like mine, which is totally based on piecemeal work and fluctuates from week to week, it's really hard to anticipate what your income will be. In a case like mine, you need to always go with a lower figure for what you might make in terms of dollars....and then readjust when you see your final paycheck.

Dividing expense categories into envelopes is a super way to discipline yourself to only spend a certain amount on certain things. When it's gone, then you have to wait until the next time there's money in the envelope!

It's also a super way to teach kids about budgeting concepts.


BUDGET PLANNING AND SETTING UP A BUDGET

There are many free worksheets and programs out there you can download on line to help you get into budget planning and help you set up your budget.

Whatever way you use to set up your budget though....just do it. You will not be sorry you did.

Living within your means does mean learning how much money you have versus how much money you're spending and making sure that you are not spending more than you make.

That’s where credit debt originates and to be in credit debt all your life is like living with a huge weight hanging around your neck.

You can do it! We all can do it! But the first step is knowing where your money is coming in and where it's going out.

Knowing these two simple facts will start you on the path to financial solvency which is what everyone needs.

If you have more suggestions for budget planning and how to set up a budget, please leave them in the comments section below!

Wishing you much luck in your financial future!

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Comments 4 comments

akirchner profile image

akirchner 5 years ago from Central Oregon Author

Thanks, Pamela....it seemed to take me forever so I'm glad it was worth the effort!


Pamela99 profile image

Pamela99 5 years ago from United States

Audry, This hub is so professional looking I bet you will win for this topic. Voted/ rated up!


akirchner profile image

akirchner 5 years ago from Central Oregon Author

I'm thinking you could make a fortune, BJ...sign me up as well, would you?

Does this mean that the whole world is FULL of dummies? I think so! I even bought Piano for Dummies and I already know how to play - what's that about?


drbj profile image

drbj 5 years ago from south Florida

Audrey - You know all those best-selling Dummy books? Like Budgeting for Dummies, Planning for Dummies, Store Windows for Dummies?

I'm thinking of creating companion books for all of them like "Budgeting for Those Who Don't Quite Reach the Level of Dummies." Whatcha think?

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