Monday, November 14, 2011

OMG....The B Word Part 3

I have read several different books on financial stability and two of my favorites are by Dave Ramsey and Suze Orman. The way I do my budget is kinds of a mix of both their ideas.The easiest way to prepare a budget is to take some time before your money comes in and plan out every thing you need. I start by making a need and a want list. I can think of a million things that I want but the hard part is realizing what I can really afford. My want list usually starts out something like this,
Clothes
Make up
A new curling iron
a new car
New couches
Shoes, Shoes and more shoes

Well, unfortunately, I can not survive off of clothes and shoes even though I when I was 20 I convinced my self I could live with out the necessities and I ended up in some crazy debt.
In reality if you don't buy the necessities first you will be trying to play catch up to pay the bills you never paid. Not paying your bills does come with consequences. You have to realize what you want in the long run. Would you rather own a house or 500 DVD's that are worth nothing in the future? Do you want collection agencies calling and harassing your all the time trying to get you to pay your bills? Making a simple budget will help you to get what you want instead of living in a life of stress. 

Your need list should start something like this. I always start out with the most important things needed for survival. To me the most important is having a place to live.
Housing (Rent or Mortgage)
Utilities (Power, Gas, Water, I don't ever want to live in a cold, dark home)
Food (We have to eat but this doesn't include going out to eat)
Telephone ( I don't own a cell phone because I can't afford one)
Transportation (Vehicle, insurance, maintenance, bus fair, bike repairs etc.)
Debt
Health care
Household
Personal Care
Entertainment

After your list make a rough estimate of how much you think you spend on each one of the categories. The categories at the top of the list should have more money allocated to them. After you place your estimates make a second column with your actual expenses. It will like something like this.

              Estimate               Actual
Rent        600                         600  
Utilities     250                         210 
Once you start figuring out how much money you spend on certain categories you will soon be dead on with your categories. At this point you can start to determine what things you can cut back on. I use the envelope system, that Dave Ramsey came up with. I write each category on an envelope and put the amount of cash budgeted in each envelope. I record every time I use money from that envelope and replace it with the receipt. I like using this method because it you physically see where the money is going and when its gone its gone.

I only use my checking account to play bills.  I keep any extra money I have in a savings account. I personally am not a fan of checking accounts because it's too easy to spend money I don't have. Plus banks are mean, they like you charge fee's for things like overdrafts. A 29 dollar overdraft fee just makes me sick to pay. That is a quarter of my grocery budget.

I found an online budget that does all the math for you and all you have to do is plug in the numbers.
Here is the link to it....
http://www.budgetworksheets.org/
I personally like to make my own work sheet, the last one I made was on cute zebra paper.  I like to turn it into a positive thing. Once you have budgeted for a couple months you will realize how much more money you feel like you have.  I encourage all of you to commit and make a budget for 3 months and you will see the difference in your life.

Happy Budgeting

Amy

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