Week 2 of Budget 101

PART TWO: MAKE A BUDGET

It’s been a week.  How’s that no-spending thing going? Well, here’s the good news:  You can start spending money again.  Of course the bad news is that after today’s assignment, you might not want to. Hopefully last week’s exercise started you thinking about the reasons WHY you’re spending and also got you to start making a serious distinction between the things you WANT and the things you NEED.

(NOTE: If you are new to “Through The Eyes Of I” or missed out last week, you might want to start at Budget 101 Part 1: STOP SPENDING before starting this week’s assignment!)

Before we go any further, I want to make a quick but important distinction that just because something is a “WANT” instead of a “NEED” doesn’t make it wrong or bad. It’s okay to want a pretty comfortable house with all the amenities, vacations or cute shoes. What’s not okay is to want all those things at the expense of your financial well-being,  your marriage, relationships, your children or anything else that we know is more important than stuff. It’s okay to WANT, but not to GET if you are not at a stable financial stance to do so. ***Don’t go on vacation, then come back and not pay your electric and gas bills. Don’t go out shopping with your friends and then go and tell your family you’re struggling*** If you are not struggling with your spending or find that you have plenty of money leftover for your savings, life & retirement accounts at the end of the month, have no trouble paying all your bills on time, know exactly where all your money is going, have great credit and don’t stress out over unforeseen expenses, then you probably don’t need to be reading this series.  In fact, you probably could write it better than me because you are obviously doing something right. I have multiple bills including a retirement and savings account, life, funeral and health insurances that I pay towards monthly, and I don’t have school or credit debt so I say I am pretty financially stable BUT…… most of us, including I struggle with money or budgeting, at least in some area. Believe me when I tell you there is plenty of room for improvement. This week’s assignment is going to require a little more effort.   The hard truth is that no one can fix your budget for you.  There are no magic solutions or ten-minute fixes that will have permanent results.  Improving your financial outlook will require change, and change is HARD.  Do it anyway.

As I tell my stepson, never neglect to do something just because it is hard, because it is the things you work hardest for that will reward you the most. Don’t let fear stop you either. It can be very scary to open up the Pandora’s box otherwise known as your finances, especially if you’ve been turning a blind eye.  In some ways, ignorance is bliss.  But if you’re still reading up to this point, you probably know, deep down, that this is something you need to do.  Take a deep breath, muster up your courage, and just do it.  You’ll be better for it. And now that the pep talk is over, it is time to get down to business:

HERE IS THIS WEEK’S ASSIGNMENT:

                      CLICK TO DOWNLOAD MY PERSONAL BUDGET WORKSHEET

1. Assess your income and fixed expenses

Print out the nifty budget worksheet above, then grab your bank statements, your bills, your check register, & any other financial information you can think of.  A calculator might come in handy too.  Then grab a glass of wine, sit down (with your spouse if your married), and start crunching the numbers.  Use worksheet number one to list all your sources of income, as well as all those key fixed payments you MUST make each month

Use worksheet #2 to add up all the subtotals of your fixed expense categories, then subtract that total from your income.  The remaining number is what you really have to work on creating a budget for.
In the coming weeks, we will work on finding ways to lower both your fixed AND variable expenses, but we need a place to start from, and this is it.

2.  Create a budget for your variable expenses

Use a pencil to fill in each category with what you are currently paying each month, then add up your subtotals and see how it compares to the number you are shooting for.  Then go back and lower different categories as necessary.  Obviously some things, like your water and electric, won’t be adjustable, but other things can probably be cut significantly.   Include SOMETHING in your savings budget, even if it is just a small amount.  If you have credit card payments, include those in your household expenses as well.

3. Take some time to self-reflect

This step may be the hardest, but it is also the most important.  Complete worksheet #4 and make some concrete decisions and goals based on what you’ve discovered through this budgeting exercise.

Maybe you’ve realized it is time to cut up your credit cards, or, at the very least, put them on ice. (Fill a bowl with water, put your credit cards in, and freeze.  If nothing else, it will slow you down!)  Maybe you’re ready to start packing a lunch instead of going out or to give up cable.  What you spend your money on is a very personal decision that only you can determine for yourself (or with your spouse.)

4. Track your spending

The last page of the PDF packet is an expense tracker.  Print out as many as you need, and use it to keep track of everything you spend.  At the end of each day, and then again at the end of each week, go over your expenses to make sure you are staying on track.  The more frequently you “check in,” the less likely you will be to let your spending get out of control.  Little things add up quickly!

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Whew, what a week!  I know this probably seems like a lot, but please don’t give up on me!  I promise it will be worth it in the end, and your bank account will thank you.  Stay tuned for another riveting installment next Sunday and remember, I want to hear from you!  How did your first week of the challenge go?  What did you learn about yourself or your budget?
Keep in mind, once again, that I am not a financial expert.  You are welcome to use these worksheets to help you–they are what make sense to me–but there are lots of other budgeting books, worksheets, & software available that might work for you better
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About Budget 101

My goal for this series is to guide you through a series of assignments intended to put you on a sounder financial footing.  Basically it is eight weeks to a better budget. It is my personal guide, a beginners budget 101. Each week we will tackle one specific area for us to work on, and then complete assignments related to that segment of our financial life. Keep in mind, just as anything you need to do in life, following this series will take some effort & commitment on your part. There are many ways to budget your financial life, and this is the blood, sweat, & tears edition. Okay, well maybe no blood 🙂 Every Sunday will mark a new week towards a better budget. Come join me and save! Click on Budget 101 in the menu scale, and use the drop down to view the series by week.

Disclaimers: 

  • I am not a financial expert or certified financial planner.  I have degrees in business administration, criminal and business law, have studied accounting, and am a certified tax preparer and tutor.  I have no credentials whatsoever beyond my own experience to qualify me for teaching anyone about saving money.  There are plenty of money experts out there who could probably explain this stuff far better than me, and some I will even refer you to.  My only goal here is to try to break down the scary world of budgets and saving into manageable bites.  Yes, this is the baby steps guide to saving. This is my personal guide, and it has worked for me.

Week 1 of Budget 101

Welcome to My Beginner’s Guide to Saving!

My goal for this series is to guide you through a series of assignments intended to put you on sounder financial footing.  Basically it is eight weeks to a better budget. Being that you are reading this, you are starting a lifestyle to a better you, and  better financial situation.

Part One: Stop Spending!!!

Saving is not easy. We live in a crazy consumer driven “have to have it” society, where the latest electronics, cars, fashions and cars are constantly being promoted; and we are made to feel like we’re missing out if we don’t have the latest or the best.  The sheer quantity of stuff available to purchase at any given time is pretty much a bottomless pit.  There is always more, more more! So we want and spend more, more, more!

So what’s a girl (or boy) to do?

Well, it’s pretty simple really:  STOP. BUYING. STUFF.

At least in theory it is simple…….

In practice, it is sooooo much harder……

Our reasons for spending money on stuff we don’t need are plentiful and varied.  It makes us feel good.  We want to look better.  We want our house to be pretty.  We want what everyone else has.  It’s fun.  We’re bored.  We’re lonely.  We want people to like us better.  We want to be “ahead of the curve.” We’re “tech junkies”.  We can’t pass up a “good deal.” We think we might need it someday.  The sales pitch worked.  We’re stressed.  We’re trying to fill a void.  It was on sale.  We’re addicted to Starbucks, tobacco, scrapbooking, shoes, video games, books, fun, etc.

Sound familiar?

The truth is that whatever the reason, much of what we spend our money on is unnecessary, a want rather than a need.  I need to eat, but I want to drink my Keurig K-Cups coffee every day. I need to wear shoes, but I want to have dozens of pairs in every color and style imaginable. I want to get my hair done, but I have student loans and bills I need to pay. I want to take dance classes, but I need to pay for health insurance every month (why is insurance so much anyways?…347.00 a month!)  😦  So much for AFFORDABLE in Affordable Care Act.

It is so very important to realize the distinction between what we think we need and what we actually need. But its not an issue of wants Vs. needs, but wants Vs. Priorities.

It is the first critical step on the path to savings.

Don’t get me wrong, I’m not saying you should never spend money on anything, and live an austere and boring life, void of pretty things, entertainment or yummy coffee drinks.

But for the sake of this series, we are going to start by curbing all spending so that down the road we can figure out how to get those things we want in a way that fits our budget.

Which brings me to this week’s assignment:

1.  Stop spending!

Try to go these next seven days without spending money on anything except what is absolutely necessary, as in matter-of-survival necessary.  No clothes, no candy, no quick stops at McDonalds, no craft supplies, no nothing.  Don’t worry, it’s only a week.  You won’t die.  I promise. It is a great way to get your budget back on track in a hurry!

2.  Make a list of wants and needs

Spend your time reflecting on all the things you spend money on in a months time, and divide those things into a “needs” list (i.e.  I need to pay rent, pay utility bills, pay health and life insurance bills, buy food, make car and insurance payment, etc.) and a “wants” list (cable, , Starbucks, etc.)

  •  Don’t just make a mental list.  Sit down and physically write down every single thing you can think of that you spend money on, from the mundane to the major.

3. Get inspired

Read a few financial articles to get yourself motivated.  It will give you something to do while you’re trying not to spend money.

4.  Find new (free) ways to fill your time

Think long and hard about the reasons you spend money frivelously.  If you are using shopping as a way to fill a void in your life then you need to seriously explore other hobbies that don’t cost anything.  Go to the library and check out some new books, make it your mission to explore every park in a 20 mile radius, set a goal of organizing every closet and cupboard in your house by the end of the summer, or better yet, have a yard sale and make some money off the things that you already have that you don’t need.

I think the thing that surprised me the most when I stopped spending money out of boredom was how much more creative I became.  The world is full of free activities. You just have to look a little harder.

And that’s it for this week!  Stay tuned for another riveting installment next Sunday and remember, I want to hear from you!  If you’ve decided to take this 8 week challenge, or if you have any ideas for fun free activities you’d like to share, please leave a comment below.  Saving money is so much more fun when you have someone to share it with.
Samantha Jonas-Rongo