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When you hear the word budget what comes to mind? Something constricting and awful? Something limiting and dreaded? Do you think of a difficult thing that won’t ever make sense? Most people I know do not have a budget. Why is that? Because doing a budget is difficult and sometimes stressful. Many people get stressed out just thinking about it! Hopefully this post will convince you to start a budget, and show you how easy it can be.
The best thing B and I did when we first got married was start a budget! We both had our own personal budgets before we got married. However, having our own apartment, bills, and student loans meant that we really needed to track where our money was going. Dave Ramsey’s book The Total Money Makeover: Classic Edition: A Proven Plan for Financial Fitness helped us figure everything out. It’s very cheap on amazon. Follow the link to find a copy! It is a fantastic book to start out with in any season of life. This book basically kick-started our “let’s get out of debt NOW” mentality. It is such a good resource! It got us fired up! From this book, we started building our budget.
We also used Dave Ramsey’s Financial Peace University book. He has sample budgets in the back of this book as well, and they were all very useful.
Now, everyone’s budget will look different. Everyone has different incomes, expenses and family situations. For B and I, we had rent, utilities, cell phone bills, etc. that we had to pay now. We had not had to pay for a lot of these things before we got our own apartment. Starting out a marriage takes quite a bit of money! So I’ll share with you the steps we took to make our budget. Hopefully it can help you out!
Here is a sample budget like the one B and I use. It’s totally free! Click this link: Budget Worksheet and download it. I use Microsoft Excel spreadsheets, so feel free to change it however you like. Make it personal so that it works for you and your family.
Write down your total income (take-home pay). Include any and all sources of income such as full-time jobs, second jobs, etc.
Write down all of your monthly expenses. This will include things like rent/mortgage, utilities, food, gas, cell phone, internet, car loan payments, student loan payments, etc. Now, some have a set amount that you pay every month. But some of your bills change, like electricity and gas. Try to figure out how much you pay every month on average for these bills that change. For food and gas for your car, average about how much you spend every month.
Make sure your expenses are not more than your income every month. You need to have extra money to throw at loans remember? So if the amount of money you are spending every month is too much, look at what needs to get cut out. B and I cut out cable TV, and instead opted for Netflix since it was cheaper. We only gave ourselves so much in our entertainment fund so that we could have fun but still pay down loans. Whatever it is, try to cut a little off around the edges so you have extra funds.
Go to the sample budget. (Budget Worksheet) Try to fill it out as much as you can. Remember, make it personal. If you do not have student loans, but you have credit card payments that you have every month, change it. At the bottom of the first page I included sample amounts that B and I spend on certain extra things. We literally have a name for every dollar in our accounts. When we get paid, I write both of our paychecks in the top row. From there, I subtract every bill until everything is paid for. Go down each row and subtract the amount from your income. Adjust the amount of money in the rows if you need to. If you find that you are paying too much money for food every month, find a way to cut back a little. The row that is labelled EXTRA is for any extra money that does not have a column to fit into. We usually only have $50-$150 left in this column every paycheck. That means that if you take our income, and subtract all of the things we pay for, you should barely have any left over. If that money does not get used for emergencies, we put it into savings at the end of every pay period.
Click here: The Total Money Makeover Workbook to purchase Dave Ramsey’s book and get more info on budgets!
Spending Plan Explanation
So I need to do a little extra explaining with this budget. It can be confusing if you haven’t done one before. But I am super OCD and I have to write everything down, so mine can be a little complicated. So first, we write down what our bills are for that paycheck. We usually pay utilities in the beginning of the month so we pay those with the first paycheck. I always estimate an average of how much our utilities cost. For example, all the utilities may cost around $200. If utilities cost less than $200 combined, then the extra money goes into an electricity fund. HA! You know how those electricity bills are in Southern California. When utilities cost more, we use the money that we stored away in the electricity fund to pay whatever is over. Usually during the summer, utilities cost more. That is when we use our stored away electricity fund from winter when we went under $200.
For the next rows:
We split rent in half for each paycheck (even though we pay it in full at the end of the month) so we don’t have all of our money gone in the first paycheck. We budgeted how much we absolutely need in gas and food for each paycheck. When gas was $4 a gallon, we needed more money. Now that it’s cheaper, we have set the amount a little less. Food is dependent on your family. We only spend $180 every 2 weeks on food. We use cash (which I’ll explain later) so if we have extra, it’s still in the envelope for the next two weeks. This will depend, however, on your family and how much you need for food.
But remember, we were trying to be frugal and put money towards loans. So we shopped at Stater Bros. on Wednesdays when they have 2 sales going on the same day. We tried to stock up on things when they went on sale. If it wasn’t on sale, we would try to wait until next time. We put meal planning into practice so we were not wasting food or buying unnecessary things.
Insurance payments. We have a set amount that we pay for life insurance. However, car insurance is only an every 6 month payment. We figured out a monthly payment for this by looking at the last couple payments we made, averaging them and dividing that by 6 months. We put that amount of money away in a side account in our bank account every month, so that when 6 months comes around, we have plenty of money to pay the car insurance. Same thing can go with rental insurance, home insurance, etc. We also do this with Christmas presents. We save a specific amount every paycheck so Christmas isn’t a surprise every year! I will have a post soon about saving money for Christmas! Look out for it!
Now some of the rows have a “C” next to it, and some have a “S.” The rows with “C” mean that we use cash. I will explain our envelope system in a different post. We use cash for things because when the cash runs out, you cannot spend anymore money. We use cash for food, entertainment (eating out and fun things), supplies (TP, deodorant, etc.), health (DR copays), and dog stuff.
The rows that have an “S” by them, mean I have a separate account in my bank account specifically for that thing. For example, I have an account for car maintenance. So I put $X amount of dollars in there every paycheck. I do not touch it or move it around until we have something we need to buy for our car. When we need an oil change or new windshield wipers, I transfer the amount we paid out of that account and into my checking account to pay for it. I hope that makes sense.
The second page is for emergency food and extras. Emergency food is for B and I when we forgot to plan dinner or got out of work too late to make anything. It’s when we have no choice but to run out to Miguel’s or Chipotle or wherever because we need dinner. I like to write down where we ate and how much it cost so I always know how much money we have left in that fund. The extra blanks are for me to write down what we spent our “EXTRA” money on. It’s usually a Target run because we need something super random that doesn’t fit into any other category. And if we have $100 extra and I spent $25, I need to know how much extra we have left.
Eventually, budgeting becomes easier. Every paycheck, B and I sit down and go over the budget. We decide what things we need to pay for that may not fit in specific categories. And we decide how much extra we can pay towards loans. We pay our bills, transfer all the money to different accounts and go get cash out for our envelopes.
It has really been so freeing to know that we can budget for Christmas presents, vacations or anything else we need to pay for. It is so extremely helpful. Whatever your budget needs, try to sit down and figure it out. In the long run, you will be so thankful when you see how much you can save and how quickly you can pay off debt. In the next couple of posts, I will explain our envelope system and the debt snowball. If you have questions, feel free to comment or contact me.
LETS GET BUDGETING!
Comment with any budgeting ideas or questions you have!