Monday, July 19, 2010

Budgeting Simplified

When I first started this blog, I wrote very lengthy posts about how to set up and run a budget. I still get many questions about this. It can be very overwhelming so I am going to try to break it down into a few simple steps. It still is a little lengthy (sorry Mags) but the topic is pretty big.

1. Sit down and write your categories.

2. Get three months worth of expenses (including a Christmas month) to see on average how much you are spending in each category. This is VERY important so that you can see what your habits currently are. If your spending $500/mo. on dining out cutting down to $20 isn't realistic. Your budget will fail. (You can get this info from credit card statements or other software you use like

3. Plan your budget. EVERY dollar needs to be put somewhere - even if it is into savings. Keep in mind to take big expenses that you know will happen like Christmas, health care, car repair, property tax, etc, take the amount they each will be, divide it by 12 (for 12 months) and put that much money aside every month so that you will have enough saved when the bill comes up.

4. Assign responsibilities. I take the variable expenses i.e. groceries, clothing, dining out, babysitting, gifts, etc. DH takes care of fixed expenses i.e. mortgage, car payment, taxes, etc. Then we have his and her gas, discretionary money, clothing, etc.

5. Track it. DH is at a computer all day and loves to use Quicken. I am on the go and need to see how much money I have when I am shopping. I use a PDA with a checkbook type app. to type in my transactions when I spend the money. This way I know how much I can spend before I enter the store. This has been the most powerful tool for both me and my clients. When you know what your numbers are doing, you can shape your spending to fit into it.

*I use a Palm Z22 with a software called Budget Master. I also love the Everyday carrying case. It is getting old in terms of technology and we are looking at the iphone with apps. One that looks good there is called Checkbook 2.2, Quicken also has an app, but it looks like you have to download it from Quicken's website. We are looking for something that will sync with Quicken to make DH's job easier.

6. Reconcile. This is DH's job. He puts all the spending from all categories into Quicken to see how we are meeting our financial goals. Then we sit down and talk about how things are going. We have stopped fighting about money and are excited about how soon we can get out of debt. (If we stick to our plan, we will be debt free by the time we are 50. It could be sooner if we keep being frugal.)

I would love to hear how you are successful with your budget or feel free to ask me questions.

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