Budget Planner How to Create a Basic Personal Budget that shows a simple break down where you are spending your money
For those of you who don’t know how to create a budget, hopefully this may help you. Creating a budget is really not that hard, but I know it can be frustrating when you don't know where to start and/or don’t have enough income to cover the expenses. To start, you need to gather your bills. Even though you more than likely don’t know everything you spent money on, you should be able to look back at your bank statement and bills to get a rough estimate of where your money went. I mean rough.
After gathering your bank statement and bills, write down all your bills such as mortgage, utilities, loans, and etc, and how much they are. These usually don’t fluctuate that much, especially if you are on payment plans with any of them. We will worry about living expenses later on. For example:
Car Loan $200
Car Insurance $100
Credit Card MC $100
Credit Card Visa $ 50
Cell Phone $ 75 --------------------------- Total Top Section $1975
I just pulled the numbers out of thin air. I tend to put what is most important at the top of the list. If electric and gas is more important than your car loan, insurance, and school loan, then put those directly under the mortgage/rent. I have found out the hard way that the most important bill is going to be your mortgage/rent. I also believe in tithing, and should be first and foremost above all other bills . As to why would be another hub.
I consider that the top part of my budget, since those are mostly your major bills that tend to have a steady amount every month. If you are not on a payment plan for your gas and electric, then you could take your highest payment you remember having, and use that for your monthly budget amount. The second part is geared towards your everyday expenses, and tends to fluctuate a lot. For example:
Gas for Car $100
For the House $100
Car Maintenance $100
Pets $ 30
Hair Cuts $ 40
Clothes $ 50
Pay Down Debt $150
Savings $ 50
Entertainment $ 50
Eating Out $ 50
Gifts $ 50 ---------------------------- Total Bottom Section $1370 Top Section $1975 Bottom Section +$1370 ----- $3345
I consider this bottom section more for everyday life expenses, and far more flexible. You can really play with the numbers here. Each category in both the top and bottom sections is going to be different for each person. Some people may have health insurance, life insurance, buying prescription medicine, and who knows what else. You can subtract categories and add categories to either the first section or second section. You can just combine both sections if you want. Having two sections helps me keep things sorted out. Who knows you may think of a third section to help keep things sorted out for yourself. This gives you a basic idea of what can be done.
You can also expand categories, or create new ones as needed. For example in section two, I have put down the category for the house. This is for anything that is bought to keep the house nice, and the necessities needed in the house. This could be broken down into toiletries, house maintenance, and cleaning supplies. It depends on how much detail you want to see.
Managing the Budget
Now you will need to know how much income you have. Gather all of your checks from work from a month and add them up. You want to use the amount you get after your work place pulls out all of the taxes from your income. Obviously you can't use any of the money that was pulled out for taxes, because you don't have it.
If you have more income than expenses, then that is a very good thing. Count yourself lucky that you are already living in your means. If you income matches your expenses, that is still good. Let’s say your income is lower than your expenses. Now we have to do some manipulating, and maybe some painful surgery.
Using the example above, the couple earns $3,000 a month. Their expenses add up to $3,345 a month. Most would say take out the tithe. You could do that and only have to worry about eliminating $45. For those of us who feel tithe is important, and it is important to honor God, then we need to look where we can reduce else where.
If you created the budget from the most important to the least important in each category, then we can start at the bottom of the second category, which is the gift category. You could start from the bottom and work your way up and eliminate gifts, eating out, entertainment, savings, and pay down debt. Or you could take a look at each and see how much you can reduce in each category without making yourself cringe too much.
You could reduce the gifts down to $20, eating out to $20, entertainment to $10, savings to $20, paying down debt to $50, miscellaneous to $50, clothes to $10, house to $75, and food to $490. Depending on what you need, and your priorities, this could be different.
Lets say the budget needed reduced further due to a reduction in pay. Yes, the tithe would be reduced with the reduction in pay. Say the couple reduced everything they could in the bottom section, but it wasn’t enough. Yes, they would have to take a look at the top section.
Before panicking, call the gas and electric company if you are not on payment arrangements yet. Talk with them to see if you can get your payments lowered. Many have programs you may qualify for that can reduce your payment and/or help make your payment. Also, call your credit card companies to see if they will be willing to work something out with you. My credit card company put me on a lower payment with 0% interest for a year after I showed them my financial hardship. That card was through my bank, and they were extremely generous with me.
If that does not help enough, or no one is willing to work with you, then you may have to get rid of the internet/tv/phone combo package would put you in the positive. You could use your cell phone as your home phone. If that isn’t enough, you just may have to get rid of the cell phone, and keep your home phone. If you have a contract, you will have to consider the termination fee. The other possibility is not paying on the credit cards.
At this point, I hate to say, I would think of not tithing. Many others would tell you not to tithe also. This is a very personal choice to make though. Even if you made the choice not to tithe and now were faced with what to pay. Pay your mortgage/rent and buy some food to keep you alive. A roof over your head and food in your stomach is more important than having the lights on.
Seeing the Details
After you get your budget down to size where your expenses are at least matching your income, you will probablly want to look more closely at where you are spending your money. Especially if you or your spouse is constantly asking where is the money going, you want to get more detailed than just adding the money to each category. Then you can show yourself and your spouse what the money was actually spent on. This is good to do for at least six months to really get a very good idea of where the money is going.
The first thing you will want to do is to add another column beside your budget, and call it actual expenses. This way you can actually see how much you are actually spending in each category as compared to the budget you created. Then you can adjust your budget later on to match your actual expenses. For example:
Budget Actually Spent
For the house $100 $75
Miscellaneous $100 $50
Entertainment $ 50 $55
The second thing you will want to do is to account for each dollar spent in each category. You need to write down every item you bought. You don’t really need to do this for the top section, since you already know the money is going towards the electric, gas, and etc. It is basically self-explanatory. For categories in the bottom section such as for the house, miscellaneous, car maintenance, entertainment, gifts, and etc, you will want a better picture of where your money is going.
This can be done on another sheet. Or you can use the left hand side for the budget, and the right hand side to list the items you bought, and how much it cost. You can use a spread sheet program, if you know how to use one. You don’t need to know anything fancy or how to make it add and subtract as long as you can put the words and numbers in. It is nice to be able to have the program add and subtract the numbers for you though. For example:
Category Budget Actually Spent For the House:
For the House $100 $75 Toilet Paper $10.00
Laundry Soap $10.00
Shower Curtain $10.00
I know I didn’t create a full list that was just to give you an idea of what I was talking about. You can do this for any category you want to. If you really want to, you can do this for all of them. By listing the items you buy, you will more than likely see a large grouping that can be created into another category. It is better than trying to add 100 different categories that can really get you confused.
For example, I started my personal budget by including everything I bought for my pets and added it in the house hold expense. I figured my furry felines were a part of the house after all. Then I noticed I was buying enough for them that they deserved their own category, which I called pets. Items that don’t have a category for or I only buy rarely, I put under miscellaneous.
Now you will be able to see you bought 80 coffees in one month. Then you can start asking yourself if you should be drinking that much. It might answer the mystery of why you can't sleep at nights. Kidding aside. Being able to see where you are spending, you can now start to ask yourself if you really want to eat out 4 nights a week, or not eat 3 of the nights and save it towards a vacation, paying down debt, that new car you been dreaming of, or invest it for your future.
This is the basics of how to do a budget. The budget can be broken down even further such as weekly or bi-weekly to match your pay. This would show you weekly how much money you need to set aside from each pay for living expenses and bills. It works best when you already have a months worth of expenses. Then you can pay your bills when they come in, and all you’re doing is replenishing/setting aside the money for next month. It is hard to do when most of your bills are coming in at the beginning of the month, and you need to pay them without having any money already in your bank account. In this case, look at your budget, and remember you do have enough money. You will have to decide which bills you can pay at the beginning of the month, and which you can pay later on and be ok. Also, contact each company in your top section, and see if they will move the due date more towards the end of the month.
I hoped this helped you.
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