Creating and maintaining a budget doesn’t have to be a challenge. With a little bit of discipline, you’ll be able to figure out how to create a budget that works for your real life. After all, what is the point of creating a budget if it doesn’t fit your actual life? So, I’m sharing with you my exact process for setting up our budget…which, if I’m being completely honest with you, I forgot to do it BEFORE this month started….
Yeah, I know. Shame on me.
Anyway, so if you want to know exactly how I create our budget every month, here it is! In all it’s imperfect glory! 🙂
1. Calendar
The first thing that I do is use my calendar when I’m setting up our budget. Since I use my budget planner, I just write in the dates/events that will require money of some sort in. Then once I have those dates written in, I start planning out and writing out our budget. Also, and this is a BIG also, I ask my husband before creating our budget what all needs to be included (think car repairs, house stuff, his hunting trips, etc.).
2. Expected Expenses
The next thing I do is list out/plan out our fixed expenses – or those that don’t usually change. Like our mortgage and insurances. Then I work on the expected variable expenses – like our utility payments. Then I work on those expenses from my calendar – the birthday party events, dates, etc.
3. How I Determine Expenses
For those variable expenses or the ones that change often, I usually take a 3 month average for the ones that are reoccurring. So, for utility bills like our power, I would take the average of the last three months or the last months from the last season. What I mean is that, if we’re at the start of the spring/summer season, I know that our power bill is going to start going up because in the winter we’re not running our A/C.
So, I would look at how much we paid last year around this same time and include that amount when I take my average from the last three months. This way, I’m predicting a number closer to the number for the particular season we’re heading into.
Now, for expenses like birthday parties, or the holidays, I usually look over how much we’ve spent before on these types of events and determine a number from there. So I would look at the last few birthday parties we’ve had for our kids and determine how much we usually spend on these events.
4. Create the Budget
Then I just create our budget (the photo below is my work-in-progress shot since I was actually late on creating our budget this month. I did it on the first day of the month instead of on the 30th of the month so some bills were already paid by the time I made the budget.)
IRREGULAR INCOME
Okay, so if you have irregular income, you know how much of a pain in the neck it is to determine your income for the month. We have an income goal of $10,000 this month from both mine and my husband’s businesses but realistically I don’t think we’ll get that high (hey, a girl can dream right? 🙂 ).
Basically, when I determine our income I first go over everything listed above and write out all the expenses. This way I know how much income we MUST make in the month in order to make sure everything gets paid for. But then we go through and set income goals based around the things that we want to do. Like right now we’re striving to pay off our house this year so we need to put aside an extra $2,300 towards this goal every month. Not to mention we’re saving for a new roof and two (small) vacations this year.
***In case you’re wondering why our “cell phone” line item is at $0 this month it’s because I’ve got enough credit from Republic Wireless that I don’t have to pay anything this month and my husband pays for this portion of the bill out of his business account since he uses his phone more for business than I do.
ZERO-BALANCE METHOD
We also use the zero-balance method which means everything is accounted for. It’s literally your income – expenses = $0.00 which also makes figuring out our income goals so much easier because again, we know if our expenses are $2,000 this month well, we better earn at least $2,000 in order to break even.
We also know immediately while tracking our expenses when we’ve gone over budget because our “difference” (the part after the “=”) is something other than $0.
5. Cash System
We use cash for the majority of our everyday purchases. This allows us to have fewer transactions to record because we just have to stick to our cash budget instead of worrying over the temptation to spend more when we use our debit card (we don’t have any credit cards – you learn more about our life without credit cards here).
Also, I track our expenses as they happen which is why there isn’t much on the “Daily Expense” sheet above since we just started this month. By tracking our expenses when they happen, we don’t forget about them and then end up over budget at the end of the month and not know why. We can be proactive in managing our money well.
Okay so that’s really it. Not that complicated. What is your process for creating your budget every month?
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We used Dave Ramsey’s Every Dollar App for most of last year. It works great and is set up to carry over some of the categories and amounts from month to month, which saves time. Before that, we used a good old fashioned legal pad. I like using spreadsheets but I couldn’t keep up with our expenses as well as just using paper/pencil and (now) the app. Do y’all both add the expenditures in the notebook? If not, what is your system for making sure your husband’s expenditures are accounted for? Good luck on achieving your financial goals this year!
We use mostly cash so I don’t have to write many transactions down. My husband and I share a debit card so I know when he has it and he’ll tell me what he spent or hand me the receipt. 🙂
This is a great way to create a budget. We follow a similar structure. If we save in some areas though, we put it into other areas. For example, if I was under budget for groceries, we might use it toward a meal out.
Thanks for sharing this amazing post. Being realistic in making budget is a key to saving. There always will be some fluctuations, so cutting your goal too closely should be avoided. Categorizing your spending can help you to make adjustments. You can identify what your spending more money at and make necessary cut backs. it is also necessary that you review your budget monthly so that you can track your spending and check out unnecessary leaks in your budget.