I have been in charge of budgets for the many jobs I have held over the years; budgets for individual schools, budgets for entire school systems, and an operating budget of $1,000,000 for the non-profit I run. I have penny pinched for these organizations for years, but I never developed a budget for my own personal and family finances!!!
Ladies and Gentlemen: If you ever want to be in total control of your life, I have learned that you not only must create a budget, but you have to stick to it with all of your might. I knew how to create a budget years ago, but I did not have the discipline to change my behavior to execute my financial plans. I think a lot of my friends fall into this category, and I have some brilliant friends! The behavior modification piece here is the key, but if you can change your behavior your life will be forever changed. I can tell you that my life certainly is!
Creating a budget that works takes about 3 months of trial-and-error, so stay patient! If you want to be extremely efficient, take one month to write down every cent that you spend in order to get an accurate feel for what truly comes out of your accounts. This is a very humbling exercise…beware!
After that, a couple months of tweaking here and there should do it, and you are well on your way to financial peace! If you choose to forgo the spending tracking and jump right to the budget, that works too. Either way, make sure that you schedule a “budget meeting” on the last day of each month with (obviously) yourself and your significant other (when applicable).
My favorite budget worksheet to use is Dave Ramsey’s Budget Worksheet. He has listed just about every category you can think of, and there is space to add your own. Please note: if you are married (or living with someone), this budget needs to be created by both of you!
My wife and I had a decent thing going; we had a joint account and individual accounts as well. We figured that if our living expenses were in the joint account each month, then the rest of our money was ours to spend the way we liked, no questions asked. This is not the way to go, people! Our combination of our finances has unified our saving and spending goals. Every dollar has a name each month, period. We still have our own individual accounts, so when we teach an extra private lesson, play a gig, whatever, we have money to spend the way we like (although every penny goes to debt right now).
You want to create a “zero based budget”. Your expenses equal your income; if you have a deficit you need to cut somewhere (duh!), and if you have a surplus (a good thing) it needs to go to saving, giving, wherever. I can tell you that the first month was completely humbling; my wife and I were guessing numbers, and we were wrong!
The worst budget lines:
Man, were we way off with these. Now, however, we are in a total groove! By the way, this budget thing only works if you stop using credit cards completely and only pay cash! Yep, that means cash and envelope system, people! It works like a charm….I can’t believe it. The cash system will be for another post though….
Have you tried a monthly budget before? What were your obstacles?
My favorite budgeting forms are Dave Ramsey’s Forms.