Budgeting

First-Time Budgeting

I remember our first-ever budget. It was in July 2003. My fine bride, Jenn, came into the living room with a budget scribbled on a piece of lined paper. She had been trying to get me to budget for the past 6 months or so, but I was not playing along (because I’m a spender!).

I believed budgets were controlling, restricting, live-in-a-Maytag-refrigerator-box pieces of trash. They made me say the word “no”, and it interrupted my flow. I wanted no part of it.

But let’s consider a snapshot of my family’s financial situation when Jenn walked in:

  • I was managing the money
  • We had $4.13 in our checking account
  • Our credit cards had a huge balance on them again – for the third time!
  • We had a 105% financed car and a 100% financed truck
  • There was nothing in our short-term savings account
  • We were B-R-O-K-E
  • I was in COMPLETE DENIAL!

I can not write this strong enough: I was B-R-O-K-E and telling my wife, “NO!” to doing something different with our finances! But, for some reason at that very moment, something happened that changed my life and marriage forever. I turned off the TV and looked at the budget she had prepared. It actually showed we could live for a month without incurring any additional debt!

LIFE-CHANGING does not describe the next few minutes. I moved into the computer room and started entering the expenses into Microsoft Excel. As I was putting together the formula to subtract expenses from the income, I realized that all of this time I could have been managing my money with the math skills possessed by the average first-grader. INCOME – OUTGO = EXACTLY ZERO! After a few minutes, we had a budget that was EXACTLY ZERO.

My life and marriage have been changed forever because we discovered that a budget is NOT restricting. It is freedom!  It is merely telling your money where to go instead of wondering where it all went. It allows you to pay off debt, save up for known, upcoming expenses, save money for emergencies, and fund your dreams.

The first budget was tough because not everything went according to the plan. Every month we had been spending an enormous amount at Wal-Mart and did not clearly know what we had spent it on. As a result, our first month was a little rough. Month two was a bit easier.  Month three was even easier.

Listen to your feelings as I write this next line: We don’t worry about money ANY MORE. We did something different. We applied God’s word and Grandma’s advice to our money and our lives have never been the same.

You CAN do this! You CAN get through the 1st month’s budget! Click on “TOOLS” at the top of the page or click HERE to download your FREE budget form and get started!

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Need further help? My book, I Was Broke. Now I’m Not., provides the exact tools my family used to win with money. It will help you do the same. Learn more HERE.

4 Reasons It Is Hard to Budget

As I assist others in the creation of budgets that actually work, I see certain issues that crop up very frequently.  In fact, here are four reasons that budgeting is difficult for many people.

4 Reasons It Is Hard To Budget

1.  Unwillingness to change behavior.  A refusal to recognize that INCOME – OUTGO = EXACTLY ZERO will not eliminate this fact from being reality.  If someone is unable to pay their bills, but they are still getting weekly manicures – something is wrong!  If someone is unable to pay their bills, yet are still spending a ton of money eating at restaurants – something is wrong! Behavior MUST change in order to move from “surviving” to “thriving” financially.

2.  It is not about money at all.  It is a TRUST issue.  You want to see power struggles in a marriage? Get them to talk about their money!  I believe a lack of trust is a HUGE reason that it is hard for many couples to budget.  It is about trust.  Here are some of the questions being asked.

  • Do I TRUST you enough to put our money together into a single checking account?
  • Do I TRUST you enough to let you pull cash out for spending money?
  • Do I TRUST you enough to follow our written plan – the budget?
  • Do I TRUST you enough to hear your opinion about where we should spend our money?
  • Do I TRUST you enough to believe that we really need to spend that much money at the grocery store?
  • Do I TRUST you to do well in the future! – Because you have messed up with money in the past!

3.  One spouse is not interested in working with the other.  This will kill a budget before it ever starts!  I have seen multiple examples where one person works like crazy to get their money in order, only to have the unfortunate surprise that their spouse has run up a huge credit card bill, or shows up with a new car, or buys a new boat, or signs up for an expensive vacation, or … The list goes on and on.  When this occurs, the “behaving” spouse (who has been following the spending plan) becomes very tempted to throw in the towel and join in with the frivolous spending.  They reason, “Well, if he/she can have what they want, I deserve it too …”  Couples who do not work together on major financial decisions run a high risk of not maximizing their financial potential.  They also run a higher risk of divorce.

4.  Failure to recognize that there is an “INCOME” portion to the INCOME – OUTGO = EXACTLY ZERO equation.  Seriously, I can’t believe I have to write this, but it is SO true!  I have people show up for counseling, and they are not working!  Now, I can understand a couple of weeks without work (maybe), but I REALLY DO NOT UNDERSTAND HOW SOMEONE COULD NOT WORK FOR SIX MONTHS!  How is this possible?  GO TO WORK! DO SOMETHING! Go get a job.  I don’t care if it makes someone feel sad to take a job at McDonald’s!  It makes me feel sad when they draw welfare for 6 months when they have ABSOLUTELY NO REASON that they cannot work – except for “it makes me feel bad”.  Waaah!  Earn some money.  It will help cure depression.

Well, I have ranted enough today.  I know that it can be difficult to budget, but I believe that you can do this!  I believe that you have the know-how, the capability, and the inner-strength to work together with your spouse, avoid the debt trap, develop a plan for your life, and have fun doing this together!

YOU CAN DO THIS!

You CAN have a budget that really works!  Check out our FREE BUDGET TOOLS to get started.

My book, I Was Broke. Now I’m Not., can help you learn to live and operate with a monthly budget and begin to fund your dreams. Purchase your copy today and get started!

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How To Have A Debt-Free Christmas

According to Sangl’s Dictionary, here is the definition of “Debt-Free Christmas.”

Debt-Free Christmasnoun The act of buying Christmas gifts without incurring any debt.

Here is the 1-2-3 steps that will ensure that you can have a Debt-Christmas of your own:

  1. Save money for Christmas throughout the year – save some money for Christmas every single paycheck.
  2. In October/November, prepare a Mini-Budget for the money you have saved for Christmas.     Click this link to pull the tool up: Mini-Budget Tool.   See the picture below for a sample budget.
  3. Ensure that it balances to EXACTLY ZERO!
  4. Stick to the plan!

MiniBudgetChristmasExample

It is that simple!

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Recommended Spending Percentages

Chrysty asked this great question (and one that I am asked often):

Do you have a breakdown that shows what percentage of our monthly income should go towards the different categories? For example, what percentage of our money should we be spending on housing, transportation, etc.

Here is a general guideline for major spending categories.

Typical Spending Percentages
Giving 10 – 15%
Saving 10 – 15%
Housing 15 – 35% (including utilities)
House Payment < 25% (including escrowed taxes, insurance, PMI)
Transportation 10 – 20% (including gasoline, taxes, insurance, & repairs)
Food  10 – 20%
Clothing 5 – 10%
Other Debt < 10% (not including house and car payment)
Entertainment 5 – 10%
All other 5 – 10% 

Hope this helps!  If you have a question, you can ask it HERE

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Prevent Overspending For Christmas!

I remember the days that I used credit cards to pay for Christmas.

There were two key reasons that I used these fabulous credit cards:

  1. I did not save money for Christmas during the year
  2. I overspent on Christmas presents

I solved #1 by creating a Christmas escrow account.

Let's say that I wanted to spend $1,000 for Christmas.  By saving $83.33 each month, I magically have $1,000 when Christmas arrives!   This takes away a lot of stress, and I highly recommend it!  You can read more about creating your own escrow account by clicking HERE.

I solved #2 by putting together a written plan for my Christmas shopping.  I pulled up a copy of the [download#3#nohits] and entered the names of those I am shopping for this Christmas.

At the top of the form, I entered $1,000 for the "Cash Budgeted".

I then wrote in the amount of money that I plan to spend for each person on the list.

Applying my secret formula for financial success, INCOME – OUTGO = EXACTLY ZERO, I spend the $1,000 to EXACTLY ZERO.

By pulling out cash for the Christmas Shopping, I can ensure that I will not overspend!

I am FIRED UP by all of the success stories that readers are sharing via the "Success Stories" link!  Have you shared your successes – both large and small?  You can do so by clicking on SUCCESS STORIES on the sidebar or by clicking HERE!