Tuesday, October 9, 2012

31 Days to Financial Freedom, Day 9: Budgeting

Along with keeping track of your spending, having a budget is the most important aspect of getting your finances under control.  If you're spending willy nilly and not keeping track, how will you know if your budget is truly balanced? 

There are millions of budget templates on the Internet.  I randomly chose a budget template I found doing an image search, and I honestly have no idea where I got it from.  I modified it to fit our needs (for now), making sure there was space to include all our expenses.  I made sure the template I picked had space for "projected" costs and "actual" costs, because I had no idea how much our expenses were in the first month.  We ate out constantly, so I had no idea how much it cost to feed a family of four.  We were always going on trips (both near and far), so I had no idea how much it cost to fuel our cars for the week.  Budgeting allowed me to guess how much we needed, then be pleasantly surprised at how much we spent!  We were under budget for both groceries and fuel in the month of September!   I'm currently working on creating a budget specifically for our needs, and I will gladly share that once it's done. 

Once we have money built up in our checking account, we will take the budgeting process one step further, by putting money into separate categories for things like car repairs, home improvement, vacations (yes - vacations are in our future . . . eventually!), etc., similar to the General Ledger we have at the hospital where I work.  Money comes in and is deposited under different GL numbers, even though it's all in the same account.  Make sense?  You could also take that money out as cash and add it to envelopes or jars, but if there's cash in our house, we spend it!  I haven't decided on the exact method we will use, but I imagine it will be awhile before we're able to do this.  Besides our long-term goal of a $30,000 Emergency Fund, we also want to have at least one month of expenses built up in our checking account.  Once we have accomplished that, we will move on to this next goal.

The first thing I did in creating a budget was figure out how much everything cost!  Here are our monthly bills in order of their due date with the estimated amount of how much they will be:

10/1: House Payment: $619 (includes PMI, insurance)
10/5:  Daycare: $115
10/6: Dish Network: $55
10/6: Internet: $55
10/6: Penn's Student Loan #1: $63
10/8: Car Payment: $284
10/12: Daycare: $83
10/13: Car Insurance: $95
10/16: Penn's Student Loan #2: $59.76
10/19: Daycare: $92
10/24: Gas: $20 (more expensive in the winter)
10/25: Utilities: $180 (includes electric, sewage, water, trash pick-up, reduces in the winter)
10/26: Daycare: $115
10/27: Cell Phone: $103
10/29: Netflix: $17
10/29: Medical: $100

These are our fixed expenses.  I budgeted each of our paychecks to be sure we would have enough money to pay for all our bills the day they're due.  Based on this information, I know that we essentially have no money the first two weeks of the month, with an estimated $40 left over after our expenses (including fuel and groceries).  We've cut our grocery allowance that week from $100 to $40, and we'll actually have to pay our car payment a week late (know your grace periods!  We have a 10 day grace period before we're charged a late fee.  Not ideal, but helpful this month). 

I can't stress how important budgeting is if you're struggling financially (or not struggling for that matter).  It has helped us in ways that I cannot express, and I can only see good things coming from it.  If you are not budgeting, I truly believe that you aren't handling your finances wisely. 

If you're not budgeting - start today!  Finish off the month strong.  Keeping track of future expenses and future income has helped us stay above that overdrawn line for the past 39 days, and it's helped us to pay our bills on time (for the most part).  Have I stressed the importance of budgeting enough for you all to know how important it is?  Budget.  BUDGET.  B-U-D-G-E-T!!!!

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