I had a wonderful time with my eldest daughter, Rache, just before she left for a vacation in China. One of the things we talked about was how she will have money ready every time an opportunity to travel presents itself to her. She has realized that she must be serious in her finances from that time on. I am an advocate of having a family budget. I have been telling her to have a budget of her own so she can manage her finances well. I think that small talk we had will change the way she values her money. I have a guest post here about starting to make a budget. It's simple you can easily do it. I am proud of Rache. She will be a millionaire someday if not soon. Here's a guest post from Financially Poor:
Budgeting: For The Just Getting Started
So you have come to the realization that youneed to control your finances. Well I’m here to help you get started. Starting a budget is somewhat easy but there are a few steps that can trip you up. What I’m going to do is walk you through the mine field so you can have a budget that you can call your own.
What your first step needs to be is make a list of categories of bills that you have every month like rent or mortgage, phone bill, etc. Here’s what mine looks like:
The reason to list those first is so when you decide how much goes into each category you can get the necessary bills out of the way first and know how much you have left over for the rest of the categories.
Next make a list of all of your monthly variable expenses like this:
If you want to make the categories more detailed go for it. You can make eating out into breakfast lunch and dinner if you want. Customize it to whatever works for you. Don’t worry about making it perfect the first time around though. Budgets tend to evolve over time so just make a first one that will get the ball rolling. The Spouse 1 and Spouse 2 is for fun money for each person FYI. Be sure when you put the two groups together that you add a line for savings between them.
Divvying Up Your Money
After you’re done making categories for your spending it’s time to find out your spending. This step is to find out how much money you spend in each category. There’s a few different ways to do this.
One way is to guesstimate how much you spend in each category. Your regularly monthly bills will be pretty accurate but your variable spending will probably be pretty off. With this method you’ll be adjusting your budget a lot and can be frustrating so I wouldn’t recommend it for most people.
The other way is to track your spending for a few months and fill in the categories with those amounts. If you have a debit card I would use that because then you can see your transactions online and it’s so much easier to keep track of. If you don’t have a card and you just use cash then think about getting a small note pad and writing your purchases down. This isn’t the most fun step but it is the most eye opening experience. When you actually see how much you spend a month you may be very surprised.
At the end of each month put all of your purchases in their different categories. This will give you an idea about how much you spend in each category. Now comes the meat and potatoes part. The point of a budget is to control your money instead of letting it control you. So this is where you decide how much you want to cut back on variable spending. I’d recommend you cut back slowly so that it’s not a big shock and turns you off. If you spent $300 on entertainment try to cut back to $250. If you cut back a lot you might get frustrated that you can’t stay within budget and could cause you to give up. so each month just cut back a little more and eventually you’ll figure out where a comfortable level is for that category.
Once you figured out your budget write it down on a piece of paper or put it in a spread sheet. I write down my budget in a notebook so I can carry it around wherever I want to and work on it. I have mine set up like this:
Another reason I write in a notebook is because I fill out, on the page after my budget, columns with the different variable spending categories and amount budgeted. Then through the month I write down the expenses as they occur in the correct category. This helps me save a lot of time.
That’s pretty much it. Not hard at all. Over time your budget will be customized to your situation. What you just created is a gateway to a better financial life. This is a tool that’s going to help you get control over your finances.
How was your experience setting up your first budget?
I hope you have made one budget for yourself and your family.