Create A Monthly Budget
Create A Monthly Budget – How Can I do That?
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There’s one word that makes many individuals shake with fear…the “B” word, or budget. Many have the misconception that if you create a monthly budget, it will tie up your money in some way and you won’t have use of it.
Of course, that’s not the case at all; the budget enables us to see where our money is going. More importantly, a well-planned budget will let you get a handle on your spending so that you will know just where and how your money is spent. You’ll know how much is going for rent or mortgage, utilities, groceries, and also lunches and entertainment.
If you create a monthly budget, you’ll have a plan where you can set financial goals for your life and you’ll have the ability to see where you stand at any point in time. Besides allocating funds for the regular bills, you’ll also set up accounts for savings, investments, future purchases, as well as college for the children.
Some individuals like to work with spreadsheets when they create a family budget, but we don’t recommend that method. It won’t give you the types of reports that you will need, nor will it be able to show you what your financial net worth is.
There are several good, inexpensive, budgeting software programs available that will do the job for you. The first item to take care of when you create a budget is to setup the income accounts. Salaried individuals generally have a fixed amount each month. Those that work on a commission basis or perhaps are self employed may have to make an estimate.
One software package that we recommend takes that into account, and uses the previous month’s income already received to cover the current month’s expenses. Once the income accounts are setup, then the listing of expenses needs to be done.
The fixed expenses such as rent or mortgage, car loans, insurance, and any other items that are paid monthly will have accounts setup also. There will be other variable expenses that will need to be accounted for as well. These will include gasoline, groceries, lunches, and some entertainment.
Some of these will be paid by cash and some may be paid by credit card. Practically every individual will create a budget that is a little different because we all have different lifestyles.
Once everything is setup in the software program, you’ll be able to see quickly whether you have a positive or a negative cash flow.
Hopefully, your income will be sufficient to cover all of your expenses, both fixed and variable, plus a discretionary amount of cash available. If not, some of the variable expenses will need to be adjusted. What you don’t want are a lot of expenses being charged to a credit card, and not being paid in full each month. Bad news.
Too many individuals have lifestyles that exceed their income and they are living paycheck to paycheck. The monthly budget software program that we recommend will teach you how to break that habit.
Learning about money management is very important and putting it into practice is critical. Planning is very important in life and creating a family budget is a part of it. The key is to create a workable budget, and one where you review it periodically and make changes where necessary.
If the budget is highly restrictive, you most likely will not follow it very long. At that point, credit card usage may increase, and the balance outstanding may max out. At that point, more problems begin and so does the stress.
A part of good money management is to understand the difference between out wants and our needs. If you have the income to accommodate your wants, then for you, it probably won’t matter much. But, that is rare today. Many individuals struggle just to have their income cover their needs.
Often times, many of us need to be a bit more frugal with our money. There are ways to have fun by doing things that don’t cost very much. You don’t have to live in a cave to be frugal, but you don’t have to appear to be one of the players either.
Find some medium ground with other friends where you can enjoy each other’s company without putting a strain on a budget.
Don’t expect some miracle to occur in a couple of weeks after you create a monthly budget. Be patient, make changes where necessary, and do your best to make your budget succeed. After that, you will begin to see those long term financial goals come to fruition.
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14 responses to “Create A Monthly Budget”
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Gust Lenglet – Platinum Author
I used You Need A Budget and loved it. The only thing that I didnt like about it was that it didn’t have automatic updates of your bank account or bills but neither does Quicken for that matter(other than your bank). YNAB is great for those who want to stay within budget and know exactly how much money they should be spending. I actually got my credit cards and household finances down by using them and it is pretty easy to use and has a forum dedicated to it and classes as well. Very inexpensive I might add.
We’ve done the paycheck to paycheck thing, but it wasn’t from buying things we didn’t need. It was back when our daughter was a baby and we were dishing out big bucks for baby supplies each month… diapers, formula.
We have a budget and use an Excell spreadsheet, but my husband takes care of all that. Basically we pay all the bills and have just a few hundred dollars to live on for the rest of the month for gas and groceries, but this is allowing us to pay off our credit card debt, and after that hopefully my $30,000 in student loans, not to mention the medical bills we have.
I love that phrase ‘too many people live lifestyles that exceed their income’. How very true. Budgeting should be taught to every child as they are growing up to prevent this constant overspend due to credit being so freely available. Check how much you have coming, how much is going out, and make the two tally.
Yes, and there is software, smartphone apps and other tools to help. You have to avoid the pitfalls, though. A lot of times budget work on paper but not in reality.
My husband and I have a weekly “couple’s meeting” to discuss our budget and other topics in the family. It’s been a great way to stay on the same page. Budgeting was new to him when we married but he now sees the light. It’s been a relief for him to understand that a budget is not a punishment but a tool.
There is very good advice here – I’ll be honest, I’ve never had a budget in place for anything but I’ve seen the price of basic goods rise and now I need to get things in order. This is what I was searching for, thank you very much for posting!
I never understood why people hate budgets so much. It’s so vital to know where your money is going and how much so that you can plan accordingly for your extras. Otherwise, you’ll land into some serious trouble. Even just some basic tracking of your financials can help you big time. Budgeting can only be a benefit!
You totally took me back to a teenager with the Zack and Kelly picture – LOL! Budgeting was never my strong suit (or my husbands). Now that we do it, I totally agree, the best thing you can do is sit down and budget your money. It’s amazing when you look at what adds up. If you don’t keep track, you may be spending more than you make! I use the Excel spreadsheet now, but I would love to try a software program. It’s hard, as my husband always forgets to give me receipts, so I tell him to use his AMEX and they break down the categories for us when we get a statement.
I agree. I have set a budget since I moved into my grandparents house. I now have taxes, insurance etc. The electric and gas have gone way up since I went from an apartment to a house that is almost 100 years old! I clip coupons, price match, reduce and reuse my consumption. When I feel like it stinks being on a budget I remind myself that I am in a real house!
When we set up a budget for our family we were completely surprised by how much money we wasted each and every month. Now, we are saving more than we ever thought we could.
I like to take a top down approach to my budget. I start with my net pay and deduct all ‘must pay’ items such as debt payments and bills, so I can see what’s left. From that left over balance I take 50% and put into savings. What ever’s left is for ‘spending’. I do not budget for recreation or fun as ‘must pays’ . These are luxuries that come last to having all bills paid and the savings are in the bank.
Many people live absolutely above their income and after getting their income,pay their debt,settle expenses. They are always left with nothing,budget become very necessary if you find yourself in such position.
Very decent article. No one should be afraid of creating a household budget, even though it is not a fun thing to do. When you do not have a budget, you are creating a recipe for disaster.
This article provided simple steps to create a budget. Fantastic, thank you for sharing. Now I just gotta go follow them lol!