Posted by
Letteer on Thursday, July 13, 2006 8:06:45 PM
Letteer’s Better Budget
Welcome to my better budget. 70% of us are living paycheck to paycheck, with too much month left at the end of money. It is “normal” in America to live broke, and wondering what has happened to all of our income. We are two paycheck households out of control, being controlled by our money, rather than controlling it.
I have seen most (I think) of the financial forms and programs out there, and most are very good, or even fantastic. Dave Ramsey’s Financial Peace University is the best overall financial program available today. Check out www.daveramsey.com and find a FPU class near you, and attend it. Another very good program is Crown Ministries small group bible study. www.crown.org
The problem is that if we have to fill out too many forms, or if it takes us to much time to get started and keep the budget going, we simply won’t do it. My budget is based off what you already enter into your checkbook registry, along with ONE form for the budget. It takes 15 minuets to fill it out and maintain it.
The hard part is getting started. I have ONE form used to do this also. (This will take a little longer than 15 min) The monthly income and expenses sheet filled out shows you where you are now, and gives you your dollar amounts for the budget categories.
On this site I have screen shots of 1) your check book registry, 2) The Monthly income and expenses form, and 3) the budget form. (Click to go to screen shots)
STEP ONE: Fill out the monthly income and expenses form. This will take you the longest, and will be the hardest, but well worth the effort. This form has the overall categories of spending. Charitable giving, taxes, housing, food, auto, insurance, debts, entertainment and recreation, clothing, savings, medical, miscellaneous, child care, and investments. From this point you just simply transfer these amounts over to your budget form.
The budget is simply an envelope system. Think of each of the categories at the top of the sheet as a literal envelope. If you cashed your paycheck and put it in each envelope, how would you spend it? You would take the cash out of the envelope and purchase whatever you needed out of that envelope. My budget works the same way only in a computer spread sheet (Microsoft Excel) or on a multi-line chart pad. Just look at one column like housing. You start with a total (T), Put the right amount of money in the category (+), and if you spend money in that category (-), it comes out if it giving you a new total for the next pay period. And so it goes pay period after pay period. If you get paid every week, and your house payment is $1000 per month, then you should put $250 every week in your housing category. Then once a month when you write your check, the money is sitting there. You simply do this for all of your categories of spending, and make your adjustments for how often you get paid.
How this all works practically is your check book becomes you ledger. I recommend that you either write a check or pay by debit card, and write down your entry right away putting what category of your budget that entry is coming out of. Then at the end of the week you (weekly pay period) sit down with your check book to enter your deposit (+) money going in, and your debits (-) money coming out of each category, in 15 Minutes or less you are done and your checkbook is balanced all at the same time….wow!
STEP TWO: Draw a line in your checkbook and write, “start budget.” Start with your current balance in your checkbook and divide it up into the categories on the pre-total line of your budget form. The balance must match your checkbook balance exactly. Keep in mind when monthly payments like your house is due when making these decisions.
STEP THREE: Divide your paycheck(s) into the categories of your budget sheet (+ money going in). You get the correct dollar amounts from the income and expenses sheet you already filled out. You have just divided your pay into each category of spending, so this now is your spending plan. For example if you have $50 in entertainment and recreation, as you go out for the weekend, don’t spend more than the $50 and you will be in good shape.
Congratulations, you are now “on a budget.” Just look at it before you go spend money and do not spend more than you have allocated for each category and you are well on your way to financial freedom.
If you have irregular income, just add a category to your budget called “slush fund” Divide your last three years of annual income by your pay period to get an average. When your pay is more that the average, put that amount in the slush fund and do not spend it. This category is only for using when your pay is less than your average.
If your budget is very tight and you can’t cover your expenses at this time. Fill out the form anyway and simply borrow from one category to cover another, like you would if you had cash in envelopes. As you develop your budget and see where your money is going, you will have the knowledge to make the right choices to get your financial life back in check.
Finally, have fun with it. Make adjustments in the categories to fit your personal situation. Find out what financial freedom really is…not more money, but making your money behave.
This is a short explanation for the basics of how to make a simple “better budget.” For the real Microsoft Excel files, and some Microsoft Word files, or for just more information, please contact me at letteer@ffni.com Thank you for taking a look, and happy budgeting!
I also have a complete bible study on money and giving if interested.
Letteer Lewis