Living on a budget is not something everybody does, but it is something that everyone should do.
As Dave Ramsey says, “If you don’t manage your money, your money will manage you”
For those ready to take control of their lives and their money, creating a budget is the first step.
Be intentional about getting started. Don’t just let each day go by and see if time just happens to tap you on the shoulder and suggest that you sit down and do this. Schedule a day and time that you can sit down for an hour, then follow these steps.
Step 1: Grab a pencil, some paper, a calculator and sit down at the table.
- Use a pencil because you likely will need to so some erasing.
- Lined paper would be helpful, but not necessary
- Don’t sit on the couch in front of the TV. Sit at the dinner table where you can focus.
Step 2: At the top, write down how much you make in a month.
- This part can be tricky if your income is variable. There are multiple ways to budget with variable income. For now pick an average of what you expect to make each month.
Step 3: Start making a list different places that your money goes each month.
- Don’t worry about the amount spent on each item yet. Just list everything that you can think of that your money goes to.
- Start with the items that are essential to life first.
Examples of essential items
- Mortgage or Rent
- Power or Electric
- Food or Grocery (not dining)
- Auto insurance
- Home insurance
- Life insurance
Examples of non-essential items
- School misc
- Kids activities
- Kids allowance or commission
- Home maintenance
- Music lesson
The the non-essentials will look different for everyone, but it is is important to get everything that you can think of listed.
Step 4: Write a dollar amount beside each and every item
Some you will know and some you might have to estimate.
Step 5: Pick up the calculator and punch in the income number at the top of the page, then start subtracting each item from that number.
Most of us will run out of money before we get to the bottom of the list.
Step 6: Balance your budget by adjusting the numbers or items until all of the money is accounted for and your final number is 0.
In future posts I hope to go into more detail about why I listed things like vacations, birthdays and Christmas in the monthly item list.
I would also like to explain further why I think that tithing and saving are essential to life budget items.
For now…Have fun creating your budget. It will feel good to take control of your money.