common sense money

 

This first step will be to determine what your current spending habits are.   

Keeping your budget worksheets in a 3 ring binder will help organize your finances, figures and goals.  Have a hole punch, pencil, black and red pen, a calculator and also extra blank paper in the pockets. Having everything you need in one place will help you keep the budget in order. 

To get started copy areas onto blank paper in the notebook and begin filling in the amounts: 

Be sure and have your spouse look over the figures so that you don't forget any regular or irregular expenses you might have.  Including him in this process will help when the budget is finally established.  Most men do not like guidelines by which to spend money, so this will help to convince him that a budget is a good thing.  A budget will help make paying the bills more automatic and a no-brainer.  It will also relieve a lot of stress, even before the debt is paid down. 

The next step that we are going to take is to list Debts. copy areas onto blank paper and keep in your notebook: 

Remember to list not only credit cards, but also any personal loans made from family or friends.  School loans should also be added here, back child support and IRS debts.  I would not add car loans for automobiles that you are currently driving, nor first mortgages or second mortgages that are for homes you currently live in, but you could add monies loaned on an open credit line. 

Here's the part where we will combine our information from the Monthly income w/s and see what our expenses looks like at this point and what an Ideal budget (the goal) would look like for your family.  Then, we'll be on our way to creating the working budget. 

We will be working on each row of information step by step.  Be sure and ask questions about this step under this post. 

Fill in the top lines of income per year. 

Under "Existing Budget" transfer the information from your Monthly Income and Expenses w/s here.  Make sure that from the Mo. Income w/s your totals are correct in each area, and then at the bottom of that sheet your income and expenses are equal. 

Under Monthly Guideline Budget, we are going to veer off so mark thru that and write "Ideal Budget".  The fun is about to begin.  Go to this link and put in your SPENDABLE income amount:  

   If you do not give Tithes to your church, put a zero in this line. 

Write down the suggested percentages in small pencil marks in the corner of each box from the online calculator.  This is important to note.  Using this calculator saves you loads of time rather than doing the figures by hand.  Be sure and fill in each line as the calculator suggests and we will move amounts that you do not need in the next step. 

Now, keep in mind that these percentages are SUGGESTIONS not the law.  A couple with no children will discover that their percents are diff. than a family with 4 children, even for the perfect budget, but the amounts given here on this line, shows a perfect budget generally speaking for the income level given.  This step can give you pretty exciting news.  For many the perfect budget is much better and allows for areas that many do not or cannot spend. 

This is the first step to building your account pages.  This is also where you will have to work your own figures, doing your own math but this is the part that gets your budget working for you and pulls your finances under control. 

We are going to begin doing the math and adding information under the New Monthly Budget row in the Budget Analysis worksheet. 

Looking at the row under Existing Budget and your Ideal Budget amounts, determine how much can and should be allotting to the different areas.  The areas that prob. won't be much different that the current spending might be Housing and Auto.  These amounts are usually set in stone if you have a current mortgage and auto loans.  But taking a look at these amounts and what the ideal budget allows according to your income, is quite a jolt, right?  The average person is spending too much of their income in these two areas, leaving too little to fund areas like clothing, entertainment, life insurance and even debt. 

Your existing budget may have some areas that you are currently spending too much in, so this last row also lets you determine if you should move some those monies to lesser amounts and add them to areas under-funded.  Each one of you will have a challenge here so be creative and work the figures in pencil so that you can write and rewrite.  Be sure and print out a new copy and fill all back in nice and neatly when you are done.  Keeping your papers in order in your notebook is a step to keeping your finances in check. 

Remember to use percentages to determine amounts and at the bottom of the that row, be sure to add the amounts up so that they total the spendable income, and the percetages add up to 100%. 

This next step is going to bring the reality of our debts into full view. 

I would be sure to add any bank loans, credit cards, financial lenders of any kind, including money owed to family and friends (even if you think for some reason that they do not expect to be repaid), student loans and IRS debts.    I would not add a mortgage unless you have a HELOC (home equity line of credit) and I would not list car loans, unless you have some done some creative financing (like credit cards, family loan, etc.) 

You can begin by listing the heaviest debt first OR the highest interest first.  Most folks like to pay down the smallest loan first and let it snowball.  But some prefer paying down the highest interest first and both strategies work.  It just depends on your motivation.  We will use this information to mark off what becomes paid off and it will be placed with your debt account page.

You will need one for each account that you will set up and one per month (Housing, Food, Auto, Insurance, Medical, Savings, Clothing, Debt, Misc., Entertainment, and then any other account that is relative to your family, like Investments or School/child care, etc.)  I like to keep a couple of savings accounts (one for Christmas, one for vacation, one for emergency.)  Also, do one more account page to show deposits and transfers. 

On the top of each page, put the category, then beside that I would also put the percentage for that particular category.  For instance "Housing 43%"  That way you'll have the quick info to use when you are making written deposits into each account. 

The best time to begin using this book keeping system is at the beginning of the month.  But feel free to begin asap. 

On the first page in your notebook, make a "Deposit" page so you can keep track of deposits and under Transaction you will note where that deposit is generated from, such as "Bob's paycheck", or "Sale of boat", or "Yard sale" or "Betty's Paycheck".  Later we'll talk about transfers. 

To make your first "deposits" into each account page, make sure that the balance in the bank is correct (in other words, no outstanding checks that need to be deducted.)  Then take the correct amount and begin to use the percentages for each category and figure your deposits.  (bank balance amount X point what ever the percent is.  example $650 x . 42 = $273)  That means that on the first line of each account page you will write "Dep. from Checkbook" under Transaction, then $273 under Deposit, then carry that amount over to Balance. 

Do this for each account, using the percentage that you have allocated for that catagory. 

When all done, be sure and go page to page adding up all of your "balances" to be sure that that amount equals the amount that is in the bank and not more.  A mistake of too much placed in your account pages can make for overspending. 

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