Thursday, April 26, 2012

Budgeting - a new way of life

A budget – you telling your money where to go instead of someone else (creditors).
When my husband and I decided that I was going to quit my job the first thing we had to do was to see if it was even financially smart to do so.  We started living off of his income (by creating a budget) and putting my paychecks towards our mortgage. We figured as long as we had the house paid off then even if he would lose his job at some point we would still have a place to live (even if we were eating beans and rice!).
When we first started created a budget we still used our credit cards for everything and paid them off at the end of the month.  We tracked what we spent in our minds…. One problem – our minds weren’t connected to know how much was already spent in each category so we were consistently still going over budget.  Then I found the cash-only system over at MoneySavingMom…. EURKEA!
This made a huge difference for us… basically you create a budget and for everything you can spend cash on you do. Once it’s gone. It’s gone.  There is something driving about wanting to see how much cash is left at the end of each month and adding those numbers up.  I then track and save those leftovers and save them for a rainy day.  For example – my dear dog… I budget $15 a month for him… that’s for grooming and vet bills. We get his nails clipped every other month so that amount adds up quickly… but in November when he has his yearly vet appointment I am able to pay the bill with cash and it’s suddenly not eating up my grocery budget.  I won’t say it’s easy, you have to be very disciplined and strict with yourself but boy is it worth it.
So the basics….you start out with how much income is brought in each month – fixed expenses (things that have to be paid no matter what) = what you have left to spend on variable expenses.  I will be listing my categories below – this is easily something you can tweak for each family. You have to decide what's a priority for your family. You must have goals in mind - something you are working towards.  Either saving towards a new car, a vacation, or paying off debt (this should be top of your list).
Fixed: House, Phone/Internet, Garbage, Gas, Electric, St Loans, Insurance (life, house, auto), Cell Phone, Charity, Taxes, Car
That gives me my net loss/savings (now if you are already at a loss here you need to do some major re-evaluating of what is a necessity in your life).
My variable expenses – items I have a cash only budget with: Medical (co-pays, chiropractor), Groceries, Clothes, Entertainment, Household, Restaurants, Rufus (dog), Transportation, Miscellaneous, Kids
A very excellent book that I would recommend to ANYONE would be the The Money Saving Mom's Budget: Slash Your Spending, Pay Down Your Debt, Streamline Your Life, and Save Thousands a Year .  She writes in such clear and easy to understand ways.  I have read this book twice and give it away at the budgeting/couponing classes I teach. It covers almost any scenario you could think of in the ways to make and save money while barely making ends meet.

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