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Budget for Your Home

January 31, 2012

Want to keep your finances in check without having to cut your own hair or drop your cable? It’s all in how you budget. The “B” word has come to be associated with something only poor households do – but in reality, even the government must do it (though our goal is to stick to our budget better than the government does!) Budgeting doesn’t mean you don’t have any money or that you’re restrictive – it simply means that there is a financial plan in place!

There are a ton of online resources to help with your budgeting needs – some range from a simple spreadsheet where you fill in your expenses and programs can calculate how much you have left over for the month. But how do you get started?

  1. Take out your savings first. Take aside a set percentage that you want to put into your savings (such as 10% into retirement if you calculate how much you need in your golden years, tithing, college funds or personal emergency funds.)
  2. Start with constant bills. Take your monthly income, subtract your housing, any loan or car payments, insurance, phones or internet bills, credit card payments, etc. If your monthly income varies due to independent contractor work or shifting hours, use your yearly income from last year and divide by 12 to use an average. For bills that aren’t monthly (like insurance every 6 months), divide the full bill by the number of months it covers to get the right monthly amount.
  3. Keep a log of what you spend. You can follow your expenses for 2 weeks, a month, or, for an even better dissection, 6 months. You’ll be able to see how much you really spend in each area. For bills that vary, like a power bill or water, use the highest amount you have had to pay to keep away surprises.
  4. Create a category for the unseen. Doctor’s visits, car repairs, and broken appliances can really throw a wrench into well-planned budgets. Set a little aside for those minor emergencies – and what you do with the leftover is up to you, whether you want to build that minor emergency fund larger, pay down debt quicker, or take the savings as a reward to yourself.
  5. Revise as needed. Do you end up buying more in one category each month, and less in another? Didn’t have enough to make it until the end of the month? Keep up with tracking and analyzing, and eventually you’ll know what you spend and what you should budget for.

I personally really like Mint.com for analyzing my actual expenses and planning a budget based on that, though some are weary about providing their personal login information for banking institutions.  There is also a great writeup by the Christian Personal Finance page about alternatives that we will explore later.

The hard part is, of course, sticking to it! Like a diet or workout schedule, you have to really dedicate yourself to see results in improving your financial health. Do you have a budget? If you don’t, what are your biggest challenges? If you do have a budget, do you stick with it? What methods would you recommend to making and keeping a financial plan for yourself?

From → money management

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