Friday, December 27, 2013
The dreaded "B" word! Yes, you really DO need to do it!
Budget. Some people think of it as such a dirty word because it sounds like if you are on a budget, you won't be able to have any fun or do anything. I have found just the opposite to be true. There is a certain feeling of freedom that comes from being able to go on vacation, or make a purchase, without the panic of "OMG... do I still have enough money to pay X, Y, Z?" You know, that gut dropping feeling where you wonder if you really screwed up? Relax. We have all be there.
The thing about a budget is that it is not meant to limit you. Instead, it is to help you determine how much money you have available for your life spending. Don't believe me? I don't blame you. And honestly, the first couple of months you try to do a budget, you are going to hate it. You are going to feel like a failure. You are going to feel angry and shocked that you have wasted so much money and not even realized it. This is normal. However, you must work through this. I promise, if you stick with budgeting, 6 months from now, you are going to have a sense of peace and control in your life that words cannot explain... IF, and only IF, you put in the work and stick to it!
Are you ready?? Ok, let's do this!
1. Grab a notebook. Without looking at your checkbook or online account, make a list of everything you spend money on and estimate how much you spend on each item. Think larger categories such as food, eating out, gas, utilities, etc. Now, if you have a Starbucks addiction or smoke or drink, these things must be accounted for! Our goal is to write down anything we spend money on.
2. Find the total of everything you just wrote down. Shocked yet? No? You must have forgotten something OR you are super good with money!
3. Write down your best estimate of how much take home money is brought into your home each month. I know this can vary, but just a safe estimate.
4. Compare #3 to #2. How's it look? Are you overspending what you make? At this point, most people are either still showing positive money, or are going back to everything listed in step 2 and trying to justify why they are now erasing and lowering that amount trying to get it to balance.
5. Are you ready to give up? I hope not, or things will never change for you and you will always be a slave to your bills! Now, if you need to take a break until tomorrow, I give you permission. However, if you are all fired up and ready to keep dragging on... read on.
6. This is the step that is really going to get you thinking and make you really angry! I want you to dig out all financial statements for the past 6 months. In this day and age, you can log in to the websites to find them. I want you to use these statements to come up with the REAL totals for the categories you listed in step 1. Don't be surprised if you are adding categories you forgot about! Also don't forget to pull up credit card statements, those are spending too!! Be honest with yourself here!
***Good job for facing your fears and getting through the first 6 steps. Can you go on? Are you ready to come up with a plan? Good! You can do this!
7. Turn to a clean page in that notebook (or open up a spreadsheet). Make a list of every "fixed" monthly expense. This includes mortgage or rent payments, car payments, utilities, and insurances. These are the things you really don't have much control over that are due every month.
8. Take that amount of estimated take home pay per month and subtract step 7. What do you have left? If you have nothing left, or are in the negative, I have really bad news for you. You MUST either get another job, downgrade your car or find a cheaper place to live! Think I'm wrong? We haven't even gotten to food, medical or gas yet!
9. If you made it to this step, you must have some money left over after step 8. That's great :) Now, we have to look at the expenses we do have control over, or expenses that vary from month to month. Things like gas, medical, groceries, vacation, gifts, etc. Without a doubt, the one we have the most power over is the food category, which will be the focus of tomorrow's entry. For now, divide the remaining money over the categories in this step. PLEASE do NOT set yourself up for failure here.. BE REALISTIC! If you just found out that you spend an average of $1000 per month on food, please do NOT write down $250 here. I am not trying to discourage you and I'm definitely NOT saying you will never get it down to that amount. However, I also don't want you to feel like a complete failure when you spend over that in these first couple of months! This part of your budget takes time and you will be constantly adjusting your budget over the first few months. Be realistic here!
Ok.. how do you feel? Overwhelmed? Hopeful? Shocked? Motivated?
Stick with it! It will be worth it! YOU are worth it!
Good job for making it this far! Tomorrow, we will talk about that darn grocery category and how we are going to kick it to a much lower number! Take a deep breath and congrats for taking the first step!!