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Intentional Living, Money

How To Make a Budget

January 26, 2015

In the past we’ve discussed why you need a budget.

We’ve also discussed how to derail your budget.

But we have not discussed HOW to make a budget. Probably should have done that first.

Whoops.

Here we are though, getting back on track and here to provide you with the practical tips on how to create a budget. This will be especially helpful if you are new to the world of budgeting or if you are trying to budget but end up confused and unable to keep up with it. I plan to post a lot of links to Dave Ramsey articles on this subject so you have more resources for motivation and inspiration.

So, how do you make a budget?

1. Income

First things first, you need to know your income so you can allocate it properly.

This includes things like paychecks, freelance work, child support, interest, birthday or holiday money, and side jobs. Any money that comes TO you is part of your monthly income to budget. It might be irregular and that is OK. It may be slightly trickier for you to gather up and predict your monthly income but it won’t be harder when it comes to the actual budgeting process.

Some of you get paid twice a month and will create a budget twice a month. Or however often you get paid you will make a budget for that payroll period until the next one.

For us, we only wanted to create a budget once a month. We simply combine paychecks from the 15th of the prior month with the paycheck on the 1st of the current month to create our new monthly budget. That way we have a month worth of income to meet a month worth of expenses.

2. Outflow

The next part is to know what your actual expenses are.

Who do you pay every month? How much is your rent? What do you have set up on auto withdraw you aren’t even aware of? Basically, where are you spending your money?

Knowing how and where you spend your money is vital to creating a budget since you know where you need to allocate funds.

 3. Get a Head Start

In order to walk into February with a complete budget, you need to do some advance preparation. The last thing you want is to have an incomplete budget and to spend money un-tracked for several days before you get down to budgeting for the month. It derails the budget and defeats your overall goal.

For example, we are going to host a new budget link-up for the month of February. All you cool cats who create a February budget will have a chance to photograph your budgeting in action and upload it to our blog for accountability. Cool huh?

BUT in order to join in the fun, you will likely need to have spent time working your budget a few days in advance.

4. Host a Budget Committee Meeting

If you’re single, you are the only one who needs to be in attendance for this meeting. If you’re married, BOTH spouses must be present to agree on the written game-plan for the month.

To save time, I typically prepare the budget for what I think looks about right for the month. Then Jonathan and I have our meeting. We go over the budget together and he has the freedom to ask questions, insert changes, or propose a reallocation of funds. Then at the end of the meeting we review everything once more and verbally agree to it.

5. Zero-Based

This is the part I think people get confused about.

Many people feel successful if they budget out the month and then have extra left over. That means the budget wasn’t zero-based.

Zero-based budgeting means every dollar has a job. You want to assign all your money into a category, so that at the end of budgeting, you have no money left to allocate anywhere. It’s either working for you in savings, gas, groceries, tithe, etc. Money that doesn’t get a job will blow out of your hands fast!

This is where you want to have a budgeting tool for help as you create the zero-based budget. The most important things get funded first – food, lights, water, shelter, and basic transportation. Then you work your way down the list assigning money to various categories in the budget until you reach zero.

Whatever Baby Step you’re on will impact how you budget dramatically. Are you in the first two steps? Then your budget will be pretty bare bones and your goal is to get that “debt snowball” category as fat as possible. Perhaps you are in the middle baby steps, so you will likely be saving a lot of your monthly income and the reins will be looser in lifestyle categories. Or maybe you’re in Baby Step 7!! At that point you can do whatever you want with your budget since you literally owe no money to anyone, not even on your house.

6. Staying On Budget

This is where your budget will sink or swim.

You have to consult your budget and track your spending throughout the month. You can’t just create a pie in the sky budget on the first of the month and then let all hell break loose. You have to steer the ship or your lack thereof will steer you into financial ruin and perpetual disorganization.

Dave Ramsey has some simple tools to help with this. There are like a million budgeting apps you can download. We use YNAB – You Need a Budget and are absolutely in love with it. Budgeting has literally never been easier for us but we went months in our early days of doing pen and paper tracking with cash envelopes to build discipline into ourselves.

7. Roll With the Punches

In your first few budgets, you will learn that you grossly underfunded particular categories and overfunded others.

This is OK.

You have the ability to rework the budget during the month if that’s what needs to happen. You can assess that you won’t be using as much money over in gas for example so you can shift the extra over to groceries or the forgotten birthday gift for your brother.

Just don’t make a habit of this. Over time you should be getting better at making a budget so that eventually you will need to readjust next to never since you are a master at knowing your expenses and what you spend in particular months.

There you have it, friends. Some tips, tricks, and pointers on HOW to get budgeting!

Join us here at True Good and Beautiful at the beginning of February for our NEW budget link up!

Happy budgeting! 🙂

 


Photo for this post CC-BY-2.0 Jacob Edward. Filter, title, and logo added.

Money

5 Ways To Derail Your Budget

January 13, 2015

Some of you are new to the world of budgeting.

Perhaps it was a New Year’s Resolution of yours. We’re about two weeks into January so by now you’ve either nailed it, completely forgotten about it, or crashed and burned hard.

No matter where you are with budgeting, I want to share with you five ways you’ll be thrown off course as you learn how to make it a habit in your life.

1. Pretend You’re a Pro

You will mess up your first few budgets. If you walk into budgeting acting like a pro and expect perfection, you are setting yourself up for failure.

How can you be excellent at something you’ve never done before? You can’t. We’re all human. Do your best and give budgeting all the effort it deserves…but inevitably as you discover you underfunded/overfunded/totally forgot certain items to budget for you need to cut yourself some slack. You can get back on the saddle and get it more right the next round.

And the next round.

And the next…until you are a true budgeting pro.

2. Forget About Tracking

If you are one of those people who plans to mentally keep track of your budget as you go through the month, you’re crazy.

You won’t do it.

Especially if you are married and you not only have to keep track of your own spending but that of another spouse’s spending.

Not. Gonna. Happen.

You need a way to track how you are spending money from your budget each month. I don’t care how you do it but you need something other than your fleeting memory. Paper and pen. Budgeting Apps. Dave Ramsey Gazelle Budget website. YNAB – You Need a Budget software.

Something. Anything.

In the beginning we were pen and paper people. We tracked on the back of every envelope how much was spent from it and the various purchases. This worked but man did it get old. We then switched to Dave Ramsey’s Gazelle Budget but it was a pain in the rear to have to save receipts from the day and then enter them one by one into the budget every evening. That’s when we got YNAB software and we’ve never looked back. Jonathan and I can spend from the budget and track it throughout the day on our phones. It then auto syncs in the cloud so our budget is up to date at all moments. Love it!

3. Don’t Consult it Before Purchasing

If you show up at the grocery store or and begin to just place items in your cart without first checking your budget, you will bust your budget quicker than the speed of light. Or agree to go to the movies without first checking in with what the Entertainment category has left in it.

The budget is meant to be a guide and not a noose. By checking in with what you’ve set aside in varying categories, you are giving yourself freedom to make wise choices with how you planned to spend money that month. You free yourself to say “yes” or “no” to whatever items or activity has come up based on what amount is left in the budget for that particular category.

By consulting the budget, you won’t end up accidentally overspending your gas money on one too nights out at the movies.

4. Be Ashamed of the “B” Word

In the world of responsible budgeting, a common phrase would be, “Let me check the budget” prior to spending money. This phrase can be really hard to use when in the company of other people and typically invokes great fear or shame.

I remember in the early days of our journey to financial freedom, it was late in the month and friends we were hanging out with asked us to go to a movie that night. We honestly didn’t know what we had left in our “entertainment” category for the month since we’d already done a few fun things in the previous weeks. Jonathan looked at me and said, “Is it in the budget,” and I got completely embarrassed.

I shouldn’t of felt anything negative since budgets are not a matter to be ashamed of. We had other priorities and going to the movies wasn’t top if we didn’t have the funds available for it. Much to our disappointment, we had already depleted our entertainment budget for the month and turned the friends down. Thankfully they were very understanding but even if they hadn’t been we didn’t need to feel anything but confidence.

5. Over-complicate Things

Lastly, one way to get derailed in the budgeting process is to make things so complicated that even you, the budget creator, can’t tell how or where to categorize things.

There is a tendency to create way too many categories in one’s budget. You don’t have to budget for shampoo. Budget for toiletries. You don’t have to budget for an occasional magazine. Budget personal blow money. You don’t have to budget for Netflix. Budget for entertainment.

You get the idea. Finding ways to bring lots of different expenses under common categories will simplify your life. Think general and make categories for those commonly occurring expenses. Those smaller ones that come up only a couple times a year can find a home in one of your general categories. We even have a “miscellaneous” category for things like stamps, Amazon Prime, and the random items that come up every now and again that need a home in our budget.

If you over complicate the budget, you won’t stick to the budget.

Hopefully you can avoid the common ways to derail your budget this year!

I think the number one reason people don’t stick to a budget is lack of accountability and support. Starting next month we will begin providing some form of budget accountability. We’re still figuring our the logistics…will it be a link-up? A photo? A hashtag? Some combination of those? We are working out the details but starting February 1, 2015 we are here to support and encourage all of you trying to stick to a budget this year!

Hope you can join us!

Intentional Living, Money

3 Ways to Cut Your Grocery Bill in 2015

January 8, 2015

That grocery bill tho!

It’s one of the hardest categories to control in your budget without high levels of intentionality…and that’s what I want to discuss here today.

It’s time to get intentional about your grocery spending and reduce that category in 2015.

1. Meal Planning

I don’t want to admit it but more often than not, I wandered into the grocery store the past several months without a game plan.

This resulted in a higher incidence of impulse purchases…I can’t resist those chocolate covered peanut clusters at Sprouts if I don’t have a handy dandy grocery list in hand.

It also led to buying random items that didn’t necessarily make a week worth of meals, so I ended up being at the grocery store making impulse purchases more frequently. It left me feeling like we never had any food in the house since I bought tons of groceries but none of it necessarily went together. Last but not least, it left me throwing out spoiled food since I would buy things and never know what night I was cooking it or with what foods I was pairing it with.

Ugh.

Why wasn’t I using eMeals, the meal planning service being SENT to my phone app weekly?

Laziness.

How could I be so lazy as to not use the pre-made plan being sent to me weekly? I have no clue. Can I blame the adoption? 🙂

I am jumping back on the wagon and committed to reigning things in this year. To my delight, eMeals just sent me an email all about their NEW plan – Budget Friendly. That sounds like my kind of plan.

Below is a sample recipe from their latest plan:

Smoky Chili

1½ lb ground beef
½ (9.6-oz) pkg ground pork sausage
1 cup chopped onion
1 green bell pepper, chopped
1½ cups homemade chicken broth
2 (15-oz) cans tomato sauce
1 (15.5-oz) can pinto beans, drained and rinsed
½ (15-oz) can corn, drained
1 Tbsp chili powder
1 tsp liquid smoke
 
Cook ground beef, sausage, onion and bell pepper in a large Dutch oven over medium heat until meat is browned and crumbly; drain. Stir in broth and all remaining ingredients; bring to a boil, reduce heat, and simmer 30 minutes. Season with salt and pepper to taste.

Head over to eMeals for your 14-day Free Trial and check out all the plans they have to offer.

Do yourself a favor and meal plan in 2015. It will make a massive difference in your grocery bill and significantly reduce waste, trust me.

2. Couponing & Price Matching

Have you heard about Grocery Smarts?

If I am going to coupon, it HAS to be easy. I don’t have time to search and scan all the ads and my coupons from the Sunday paper.

That’s where Grocery Smarts comes in handy. I literally tell it what state I am located in and then select the stores I shop at and it shows me what items are on sale, how hot of a sale it is, what coupons I can combine with the sale, and the final estimated cost of the item.

All I have to do then is find the coupon in my paper ads or print it from online.

As for price matching, you can absolutely bring all the ads with you to your favorite grocery store and price match at the checkout counter. We’ve also been using Walmart’s savings catcher and they more or less do the price matching for us and give the savings back to us on a Walmart gift card.

3. Staying on Budget

Last and absolutely not least…a way to reduce your grocery spending is to set a realistic budget for you and/or your family and then STICK TO IT!

This can be the hardest part but it’s vital to actually bringing more order and control to this area of your life. Once you know your budget, meal plan around it, and then have a system in place to hold you accountable.

Cash envelopes are pretty darn hard to argue with. When the money is gone, it’s gone.

We use YNAB – You Need a Budget software and are totally in love with it. Every time we are at the grocery store, we immediately pull out our phones first to consult the budget and determine how much is left in groceries for the month. At checkout, we then enter in the grocery store and amount spent..and seconds later our budget auto syncs to let us know what’s left in the grocery category.

So simple.

You can sign up for a FREE 31-day trial with YNAB or use this link to get $6.00 off if you do decide to purchase it.

I hope these tips are helpful to you for not only saving time but lots of money in 2015. We all have bigger goals than the grocery bill on any given month so freeing this category up will allow you to hit some other milestones in your budget!

Money

Calling All College Students: YNAB is FREE!

March 25, 2014

Ummm this is HUGE!

Many of you have heard us rave about YNAB in the past. It’s our go-to budgeting software that stays in sync via the cloud between our computers/phones. It makes budgeting and sticking to the budget a piece of cake.

If you need convincing about the vital need you have for a budget – read this post.

Long story short – if you handle any money at all, you need a budget.

budget

What’s amazing is that just today, YNAB has made their software FREEEEEE for college students!

So, click on over there, get your software, take some of their classes on how to use the program, and begin budgeting!!!!

You’ll thank us later in life. Trust me.

For those of you who are NOT college students reading this…sorry there are no fun freebies for you. The best deal we can get you is a $6.00 off coupon on your YNAB purchase.

We firmly believe in this software and believe it’s better than almost anything else out there (paid or free) in the App Store, Mint.com, etc. If you want reasons why, just ask!

Happy Budgeting!

 

Money

5 Reasons You Need a Budget!

October 7, 2013

Many of you are aware of our slight obsession with all things Dave Ramsey. We have gone and drunk the kool-aide and it tastes great! Often we are asked things like, “How do I do what you guys did?”, “Do you think there is hope for my situation?” etc.

We are happy answering these questions, since using Dave Ramsey’s principles and methods have blessed us immensely. We can’t help but want to pass it along as a blessing to others. Hence this post. Trust me when I say that if you don’t have a budget, you will not win with money. Everything hinges on this one discipline, so check the 5 Reasons You Need a Budget below and see if you need one:

budget

1. You wonder where all the money went. 

Have you ever gotten to the end of the month and wondered where your money went? Me too. You need a budget.

A budget is simply telling your money where to go instead of wondering where it went. “Be diligent to know the state of your flocks, and attend to your herds.” Proverbs 27:23

A budget puts you in control of your money, not the lack of money in control of you. It’s giving every dollar a name, whether its savings, fun, or paying off debt.

Can you imagine being in full knowledge of what happened with every dollar that was given to you last payday? It’s empowering. With a budget, there is never “more month than money.” You will feel like you got a raise over night by simply being aware of your money.

2. You check your account balance (in fear and trembling) to see if you can afford a purchase.

Is checking your account balance or mint app your idea of seeing if you can afford to go out to dinner tonight or shopping with friends? You need a budget.

A budget is telling your money what you plan to do that particular month or pay period. You can tell it to have $50 set aside for restaurants. You can tell it $50 for shopping. You can tell it whatever you want, as long as you give every dollar a name before the month or pay period begins.

By following a budget, you take all stress and anxiety away from spending or the dreaded overdraft. If you are married, and you’re spouse budgeted $40 for shoes, you aren’t shocked when they walk in the front door with a Shoe Carnival bag. You budgeted for it. You don’t have to check the bank account to know whether or not you can cover it. And you don’t get into a fight. Double win! 🙂

3. You have used a Credit Card for “emergencies.”

Many people’s “emergencies” look more like needing more gas, forgotten birthday gift, new brakes on the car, a medical copay, or going to dinner with friends. I call these “emergencies” since a they are pretty much all items you should anticipate. Cars break. Christmas comes at the same time every year. You will go to the Doctor sometime. You will drive your car and need gas. These are not emergencies. You need a budget.

When someone is truly in an emergency situation they really couldn’t plan for, the LAST thing they need hanging over them is a nice fat credit card bill charging them 18% interest. The emergency is now a nightmare! No one would wish that on their enemy.

By following Dave Ramsey’s principles, the first step is $1,000 in an Emergency Fund. After you pay off all debts except the house, you fund that Emergency Fund up to 3-6 months of expenses. You don’t need a credit card because you pay for any emergency that comes along. A budget allows you to get into this financial position.

4. You think budgeting is for poor people. 

Do you think that people who budget only eat bread and water or are so broke they have to follow one? You need a budget.

“Adults devise a plan and follow it. Children do what feels good.” Dave Ramsey

“In the house of the wise are stores of choice food and oil, but a foolish man devours all he has.” Proverbs 21:20

Wise people budget. If you poll and study most millionaires, they will tell you they didn’t just win the lottery one day and become wealthy. They had a plan for their money. They made it work hard for them. They told it what to do instead of floating along hoping one day they would have some wealth. They budgeted.

Actually poor people could change their financial position and not be as poor or poor at all if they simply put together a budget. Anyone living on less than they make, telling their money what to do, and stewarding it well will end up winning with money. Anyone can achieve financial peace, whether you make $20,000 a year or $200,000 a year. Both need budgets to win with the money entrusted to them.

5. Your idea of savings is to calculate whatever’s left at the end of the month.

Do you spend and buy whatever you want throughout the month and then save whatever ends up leftover? Or do you not really save consistently at all? You need a budget.

In order to achieve your financial goals and dreams, you have to start putting money aside to pay yourself first. If you don’t do this, the tyranny of the urgent will take over and you will likely never have momentum in your savings efforts. After paying your bills and necessities you can figure out what you want to be saving that month or pay period for whatever goal you are working towards (debt freedom, down payment, honeymoon, newer car, etc.)

This is the secret to really tearing ahead and making progress. However, it does require the ability to say “no” to yourself/others temporarily so you can say “yes” to your bigger goals and dreams.

Need a budget?

In case you were one of those people who needs a budget, you may be wondering where to start? First, I would read Dave Ramsey’s Total Money Makeover to set a solid foundation for yourself. Then when you are ready to budget there are lots of programs, software, apps, etc. out there for your budgeting use. I recommend ones that we have used/currently used.

1. For you Paper & Pen Folks – http://www.daveramsey.com/tools/budget-forms/

2. For you Tech Savvy Folks –  YNAB -You Need A Budget. (includes a $6 off coupon)

We started using the paper and pen and eventually wanted our budget to be in “the cloud” so we switched to YNAB. We absolutely love it. We did try Mint.com and had nothing but trouble. It may be helpful for some but wasn’t for us.

Warning – YNAB does take time to learn and I highly recommend taking the online courses they offer. We LOVE the ability to buy something and instantaneously use our YNAB app on the iPhone to track the purchase. One and done. We always have an accurate view of our bank accounts and know what’s left in every budget category at all times. Our budget meetings take about 10 minutes per month now. Zero surprises. Financial peace.

Let me know how budgeting goes for you!