Debt Talk: Creating a Monthly Budget

 

debt talk computer budget

 

Creating a budget is ground zero for getting your finances, debts, and wealth under control.

I firmly believe there is no way you will get where you wanna be, when you wanna be there without a budget in place that you are sticking to. yeah, yeah … there will be screw ups but it is a process and here is the beginning step-by-steps:

  1. Outline everything you are spending money on and categorize. This sounds so much easier than it is in practice so let me lend a little advice. Of course the obvious ones are there: rent/mortgage, car insurance, electricity … but what about food? Of course you are eating but are you going to lump all your food into one category versus groceries, date night, alcohol, etc.? These are decisions that are flexible and at the bottom of this post I will blueprint what we do.
  2. Allot the cash. Again, easier said than done and you may have to play with some of these numbers in the beginning when you are first getting the hang of it. Determine what you spend on each category and fill it in next to it. For things like food and gas it may be easier to calculate what you are spending weekly and go from there. It may also be helpful to look in terms of percentage of income to category when determining these numbers but for us that didn’t make much sense. Where we are living, the rent is high high high but I work from home so what I need for gas isn’t the same as someone else. It also doesn’t make sense for us right now because we are already locked into our rent, car payment, etc. If we were to move or make a large purchase that would factor into our budget, we would look at percentage of our income while making our decision.
  3. Add it up. This is a pretty crucial step. Once you have a column of all your “allotted cash” you need to total the sum. This is how much money you intend on shelling out each month towards expenses. If this number exceeds your net income, you need to take out the scissors and start cutting. If not – figure out where you would comfortably like to put the extra money: credit cards, debt, 401k, etc. Every dollar should have a purpose to avoid frivolous spending.
  4. Track it – Regularly. Whether you are utilizing the envelope system, tracking your receipts after every expense, or using a service like mint.com you should know where your money is going to ensure you are actually sticking to this budget. You won’t always. That is okay. But learn from where you are spending … were you unrealistic with your food budget or are you eating out too much still? Either way – this is a learning process that will require adjustment as you go and as your life evolves.

Garrett and I utilize an excel spreadsheet.

Our categories include:

  • rent
  • my car payment (Garrett’s car is paid off)
  • car insurance (we pay this semi-annually to save cost but “collect” the money for it monthly)
  • internet
  • electricity
  • cellphone
  • food
  • renters insurance
  • private student loans
  • federal student loans
  • gas
  • car repair
  • medicine / eyewear
  • shopping / clothing
  • misc. (we allot ourselves a little “whatever we want” money)

 

We log what we want to spend in each of these areas. Currently, we are tracking everything through mint.com but for areas that we are not always spending monthly on like clothes, car repair, medicine/eyewear and car insurance, we are “collecting” the money each month keep it separate and ready for when we actually need it. In terms of food we actually do separate groceries and eating out but if at the end of the month we still have extra in eating out but need more for groceries, we will spread the love. Any extra that we have goes towards student loan debt.

Additional word from the wise: be realistic with the food budget. This is the area that most people tend to go over on and if you are going over month after month no matter how many coupons you are clipping – it can really hurt the motivational vibes. So best to keep it real upfront and some budgetters say they actually like to “budget” themselves a large amount in this area with the knowledge that they will definitely stay under because they tend to spend even less than they would if it was a small budget. Yep. Budgeting is also about psychology and mind games, not just money and numbers.

 

Are there any categories in your budget that are different than mine or do you have a different want of planning out monthly expenses? let a girl know in the comments 😉

>>> Kate

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