What is a budget? What is its purpose? Who needs a budget?
I’m answering those questions from my perspective during this post.
The dictionary’s definition of a budget is: an estimate of income and expenditure for a set period of time. Synonyms include a financial plan or forecast. I could not find any definition that included words like burden, hassle, or being broke. 🙂 Although many people believe that is what budget means. Maybe we will call it a spending plan. That sounds friendlier. 🙂 When I mention”budget” to some people, they automatically associate the term with being broke. I think “having a budget” has gotten a bad reputation and can often lead people to think negatively.
I know that many people disagree but I believe that everyone could benefit from a budget. I won’t go so far as to say everyone “needs” a budget but I do think it can benefit every income level.
Budgeting (or learning how yours will work) takes some time. It takes a while to figure out exactly what works for you. Time is one of the reasons that I feel some people don’t try to save money.
There are many, many different ways to budget. Many people budget very strategically and give every dollar a category. Others lump the required expenditures together and the rest can be used differently based on the month.
What I have found through using a budget is that I feel so much more successful. That may sound crazy because sometimes I can’t get what I “want” because the money is not in the budget. What a budget allows me to do is to set aside money for something that I really desire. I know that I don’t have to say that I simply can’t have something if I really really love it. It just means that the money has to come from some where. It is not going to magically appear. If I get that one thing, I might not get something else. It doesn’t replenish itself automatically around here. Wouldn’t that be cool, though?
The budget that my husband and I use (and this was developed after much trial and error) has several detailed categories. These came about after we had expenses that had no where to “go” to be accounted for. Many of these may or may not relate to your personal needs.
If you’ve been doing a budget, then this is going to sound very simple. If you have not, just bear with me. Start with your income. You need to determine your income schedule (weekly, biweekly, monthly). That will be a big part of deciding what gets paid when.
Then begin with your set expenses. For me, these include our tithe, mortgage, tuition, water/sewer, phone, insurance, fuel, and electric bill. Notice below we have these things as ACH. These things are automatically withdrawn from our checking account.
For payments which fluctuate such as electric,water, and fuel we looked at the previous three months and took an average when deciding how much to put into that category.
From here, there are several different routes that you can take. For us, we put a set amount into each category each month. If you’d like to take a look at our specific categories, I have included them here:
|ACH: Auto Insurance|
|ACH: Bills & Utilities: Security System|
|ACH: Bills & Utilities: ATT|
|ACH: Bills & Utilities: Entergy|
|ACH: Bills & Utilities: Water|
|ACH: Church Tithe|
|ACH: Gift Charity: compassion int’s|
|ACH: Gift Charity: world vision|
|ACH: Home Mortgage|
|Tuition & Education|
|insurance dental and vision|
|Food & Household|
|Fuel & Maintenance|
|Shopping Blow Money|
|Shopping Blow Money|
Another way to do a spending plan is that the the “rest” of the money can be used for whatever is the priority for that month.
For instance, we put a set amount into vacation each month. We could also just look at the remaining amount for 1-2 months and say “This month we are using this for vacation” so the other extras would have to wait. November and December extra funds could be used for Christmas.
If you’ve never done a budget, I hope that this will help you to have a launching pad to your own. That’s the great thing about a budget. It is a personal journey toward your financial freedom.
It takes a bit of time to get going but I have found it to be well worth the effort!
I’ve included several of my favorite websites which discuss budgeting (spending plans 🙂 ) below:
What about you? Do you have a budget? Want to? Not at all interested?