It isn’t glamorous, and it certainly isn’t as cool as a new hunting rifle, tool, or vehicle, but a budget you can live with is a critical part of your preps. Without a budget, you’ll stumble needlessly on your journey to financial freedom and personal liberty.
Before we get started though, I have to share a couple things. I have no background in financial consulting, I’m not a financial advisor, and I don’t even play one on the Internet. What I am is a mom who used her best friend’s budget template and some old-fashioned common sense to come up with some strategies that work for us in our situation. I’ll share my experience, my path, and some hard-learned wisdom, but in the end, it’ll be up to you to make some kind of budget that works for you and your family. When you do, you won’t be sorry!
Step 1: Decide Who’ll Maintain the Budget
If you don’t live with a significant other, sorry, this job too shall fall upon your shoulders. But if you do have a partner, negotiate who’ll be responsible for maintaining the actual document that is the budget. Understand though that maintaining the budget doesn’t give you auuthority to do as you please. The partner who won’t be maintaining the budget can and should have input about the financial business of the couple/family.
What We Did: In our family, I’m the one who developed the budget. As I said above, I used my best friend’s template and adpated it to meet our needs.
Step 2: Choose a Format for the Budget
The format doesn’t really matter. Whether it’s a computer spreadsheet, a tabular notebook, or crayon on your wall (OK, I’m not advocating that, but if it works for you, who am I to argue), you need to choose a format that’s legible, easily corrected, and organized. If there’s a partner involved, it also needs to make sense to your partner.
What We Did: Since a paper and pen won’t work for me, and since my husband doesn’t read Braille, I chose to adapt my friend’s Microsoft Excel spreadsheet using OpenOffice.org Calc. A spreadsheet meets our requirements and saves us a great deal of time because I can copy one month to the next spending very little time making edits.
Step 3: Fill in the Blanks
Start by blocking your page (whether you’re working with pencil and paper or a spreadsheet on the computer) into sections that represent paychecks. My husband gets paid on the 15th and the 30th of each month so our spreadsheets are divided into two sections. You’ll divide yours into 2, 3, 4, or 5 sections, or you might have only one section; it depends on how your paychecks fall that month. At the top of each section, you’ll put the pay date and the balance in the account that you’ll use to fund your budget. For those of you who don’t use a checking account, that’s OK. You can use an envelope system with cash or you can use the balance on a pre-paid debit card. I’ll use our situation to illustrate. (Note that the data is made up here, but the process is the one I use when setting up a budget.)
| $1300.00 | Jun-15-11 | – |
| – | – | – |
| $1300.00 | Jun-30-11 | – |
| – | – | – |
Then you’ll look at your have-to bills and place them on the budget so that they’re paid before their due date, like this:
| $1300.00 | Jun-15-11 | – |
| – | Budgeted | Spent |
| Car | $400.00 | $400.00 |
| Insurance | $100.00 | $100.00 |
| Electric | $300.00 | $300.00 |
| etc. | etc. | etc. |
| $1300.00 | Jun-30-11 | – |
| – | Budgeted | Spent |
| House | $700.00 | $700.00 |
| Water | $20.00 | $20.00 |
| Phone | $40.00
$40.00 |
|
| etc. | etc. | etc. |
Other than the necessary utilities (water, electric, gas, and phone if there are children or elderly folks in your household), the mortgage, car, and insurance, I view gasoline as a have-to. Some might think that’s strange, but if my husband can’t get to work (because we don’t have fuel or the car was reposessed), he can’t bring home a paycheck to continue to cover the have-tos.
Add an appropriate amount for groceries. Don’t forget your pets and your children! It’s OK to budget more than you think you’ll need for groceries. In the beginning, there’ll be some adjusting, and if you run as tight a ship as I do, the grocery budget is where we do the “adjusting”.
Add every bill to your budget, and don’t forget to add a spot for savings. If you’re like us, you might only manage to save $5 a month, but it’s a start. Acquire the habit!
Finally, at the bottom of each pay period, I do a little math (or more precisely, I let my computer do a little math.)
| $1300.00 | Jun-15-11 | – |
| – | Budgeted | Spent |
| Car | $400.00 | $400.00 |
| Insurance | $100.00 | $100.00 |
| Electric | $300.00 | $300.00 |
| Groceries | $300.00 | $318.00 |
| Satellite | $60.00 | $60.00 |
| Fuel | $70.00 | $68.00 |
| Savings | $35.00 | $19.00 |
| DSL | $35.00 | $35.00 |
| TOTAL | $1300.00 | $1300.00 |
| CARRY-OVER | $0.00 | $0.00 |
Step 4: Keep It Real
A budget is useless if you don’t stick to it. You won’t stick to it if you don’t make realistic allowances. You have to start with dirty, honest truth of your finances before you can tweak and adjust. Once you get into the habit writing things down, filling things in, and staying accountable, then you can adjust your spending patterns to meet your goals.
For instance, let’s say that you want to pay down some credit card debt. By all means, do it! Credit card debt enslaves you! But you’ve been keeping your budget updaaated over the lassst couple months and it looks like you don’t have any money. By having your expenses spelled out in one place, you (or you and your partner) can decide where to make cuts in your spending to pay off the debt faster. After all, we’re not the US and we can’t call our creditors to say, “Hey, I know I’m making the minimum payments here, and I know I’m at my credit limit, but you’re going to raise my credit line because I’m so important and I’m going to pay my bill each month with money that I just poofed into being with my magic money press.” So we have to find extra money by making some sort of sacrifice. Maybe we get a cheaper cable package. Maybe we sell a few things on eBay that we never should have gotten in the first place. Or maybe we get creative and start business to generate just a bit of income on the side.
Whatever we decide, we use our budget as a tool to pay off debt, save money for our emergency fund, our retirement, and our wish lists (you’re allowed to have a play budget too if the money makes sense), and we get that much closer to reaching our goals.
Note: As soon as I’m able, I’ll compile a sample budget. I’ll link to the .ods (OpenDocument spreadsheet) file here and on the Media Shelf page.