For many people peace-of-mind comes when they know how they are going to pay that next bill. It is hard to get a grip on finances when we don’t know exactly where our money goes.
That is where starting a budget becomes invaluable. Once we have a clear understanding of how much money we are bringing in, how much money we are spending, and what we are spending it on, we can really take control of our financial situations.
Many experts say that it is a good idea to track your finances for about three months. Write everything down. Every penny you make and every penny you spend. By the time the three months is up, you will have a clearer understanding of places you can trim expenses and habits that you may want to change.
There are many budget sheets out there, but there is one thing that I find most of them are missing, that is the fact that some expenses change from month to month. For instance, for most people their utility bill isn’t exactly the same every month so trying to budget that as a fixed expense is next to impossible.
I found a great article at the University of Idaho’s website I liked it because it includes a fixed expense section as well as a variable expense section:
Here is a link to the article, or you can just read it here:
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YOUR INCOME
To begin building a budget, you must know how much disposable income you have to work with. (Disposable income is what you have to spend after taxes, insurance premiums, and other employment-related costs have been withheld from your paycheck.)
For a month, identify all of your money sources and record their amounts. Whether you get paid weekly, every two weeks, or monthly, total the amounts for a monthly figure and enter them on a budget worksheet.
While income sources will vary from person to person, the following list will get you started:
- Wages/Salary
- Tips/Commissions
- Child Support/Alimony
- Public Assistance/TANF
- Social Security/Pensions
- Unemployment/Disability
- Veteran’s Benefits
- Interest/Dividends
YOUR EXPENSES
To continue building your budget, you’ll need to identify and list your expenses. If you’ve tracked expenses for at least a month, this task will be easier.
Fixed Expenses
Fixed expenses are regular, set amounts that you spend each month. The amounts do not change during the year. You have committed to pay them on a regular schedule, and they cannot be easily changed. Some common fixed expenses are:
- Housing (rent, mortgage, association fees)
- Insurance (health, life, property, vehicle)
- Savings
- Vehicle payments
- Cable/Internet
- Other loan payments
Variable Expenses
The next dollar amounts to consider when building a budget are your variable expenses. These change depending on the time of year, usage, and circumstances. You decide how much to spend on them and when to spend it. Although variable expenses are important and not frivolous, you can cut back on them—or even eliminate some of them from your budget entirely—when money is tight. Some common variable expenses are:
- Food
- Clothing
- Transportation (gas, oil, maintenance, parking, bus, rail, taxi)
- Utilities (electricity, garbage removal, gas, oil, water, sewer)
- Land line/cell phone
- Household (maintenance, furnishings, garden/cleaning supplies)
- Health and medical
- Child and elder care
- Personal expenses (haircuts, cosmetics, laundry, dry cleaning)
- Education
- Recreation and entertainment
- Other (allowances, church, gifts)
If you have a steady income, consider signing up for level pay for some of your variable expenses. For example, your heating costs vary depending on the time of the year. Using level pay allows you to pay the same amount every month of the year. It makes your summer bills higher, but it keeps your peak winter bills from breaking your budget.
Periodic Expenses
Finally, consider your periodic expenses when building a budget. Not everyone has them, but if you do, include them in your budget under variable expenses. Examples:
- Tuition
- Back-to-school or summer camp health check-ups and related expenses
- Servicing of household equipment/systems (sprinklers, heating/cooling, septic tanks) and recreational vehicles
- Pets and other animals (veterinary bills, boarding, licensing)
- Holiday expenses
BUDGET WORKSHEETS
To assist you in setting up a budget, we provide you with several interactive worksheets, which you can print or download to your computer:
- Monthly Income & Expenses Worksheet
- Personal Budget Worksheet/Family Monthly Budget Planner/Personal Monthly Budget Planning
Be sure to include all of your income and expenses. If a worksheet doesn’t include a category you need, personalize and adjust it to fit your circumstances.
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Making a budget can be overwhelming and somewhat discouraging. I know when my husband and I first started making and sticking to a budget, I felt a little trapped and confined. However, I quickly learned that following a budget and knowing where my money was coming from was far less confining than having responisbilities that I can’t pay for.
Good luck, don’t get discouraged, soon peace-of-mind will be yours!