How do I budget? Part 03

In this series of posts, I am sharing the process that Jenn and I followed to develop a budget that actually worked!

Let's review the steps already shared.

STEP ONE  Understand that budgeting is nothing more than "telling your money where to go"

It is so important to tell your money where to go – instead of wondering where it went! 

STEP TWO  Determine the income (take-home pay) you will receive during the NEXT month.

This income is what you will be spending on paper BEFORE the month, the money, and the bills ever arrive! 

STEP THREE  Enter all of your expenses for the NEXT month.

This is where you spend your money on paper!  In Step Two, you determined your total income for next month, and it is now time to spend it on paper BEFORE the month arrives!

These expenses are the real, actual expenses that will happen.  I have seen many people include average expenses for the year.  Averages don't work!!!  Enter the real expense because this budget needs to be highly relevant to the next month!

If the expenses are not relevant to the next month, it is highly possible that you will consider the budget irrelevant for the next month!!!  Smile

If you don't know the ACTUAL cost (utilities, gasoline, etc.), enter an educated guess based on recent spending.

Enter all of the expenses into your budget.  You can obtain your FREE COPY of budgets by clicking TOOLS at the top right-hand corner of the page.

The budget form has some excellent features built into it.

  • If OUTGO exceeds INCOME, the TOTAL will turn RED and tell you how much you have overspent!
  • If INCOME exceeds OUTGO, the TOTAL will turn YELLOW and tell you how much more money needs named!
  • When INCOME = OUTGO, the TOTAL will turn GREEN …  This is the ultimate goal!

Even if the budget TOTAL turns RED, keep typing in the expenses that you know are going to happen in the upcoming month.  The goal is to get all of the known expenses for the next month on paper.

YES, you will later have to remove some expenses or boost your income to get to GREEN, but the goal right now is to get all of the expenses into the budget form!  By having all of the expenses in the budget, you can make a much more informed choice on what will be removed from the budget.

Click on the picture to the right to see an example budget with all of the expenses loaded.

1 Comment

  1. Saving Freak on October 24, 2007 at 6:30 am

    We had our own budget spread sheet but switched to the one that Joe has in the tools section because it is so comprehensive and easier to work with. The budget forms are one of the best tools my wife and I have been able to find.

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