Do you have a budget for your household? Budgets have a bad reputation. I get it. People think that budgets take all the fun and spontaneity out of life. I agree.
When we create a budget just to say "WE HAVE A BUDGET"! Things can get real old, real quick.
We learned the hard way that a budget is simply a map to our goals. It is not a controlling parent telling us what we CAN and CANNOT do, but rather the path to the life we want.
So before you create a budget, talk about your goals. Dream a little with a friend or spouse. What do you want your life to look like in 5 or 10 years from now. Write those things down. With those dreams and goals, fresh in your mind, let's create a real, purposeful budget.
This should really take you 10 minutes tops! Our budget has 5 parts. It is simple, but super effective. So get out a sheet of paper, your favorite pen or open up Evernote. Let's get to work.
At the top of your paper write down your income. What did you make this pay period? Even if you make the exact thing every single month, go through your bank statements or you pay stubs and figure out your income each and every month. Write that at the top of your paper.
If you want to reach your goals, you can't spend more than you make. If you have big, awesome goals, your income is your biggest tool. It is simple math. Do you make enough to reach your goals? Do you need to generate more income this year to reach those goals?
Filter everything through your goals.
How much are we going to give this pay period? Write that down under your total income.
Do you have a church or other charitable contributions you like to give money to? How much will that be this month? Write it down. Think about how much you want to give this year total. Set some goals for your family on giving. How will you invest in others?
Subtract your giving amount from your income this pay period. Now you know exactly WHAT to spend this month or pay period.
Income - GIVING = Money I have to SAVE OR SPEND Until I get paid again
What do we need to spend to live? List out all your LIVING expenses. Make one big column of all of them! Your rent or house payment, your utilities, daycare, gas, food, date nights, clothes, insurance, and target runs. List everything out!
On things like food or household needs, try to give yourself a cash budget for those things. It may take you a few months or so to decide HOW much your family needs to spend in these categories. Give yourself time, but try to only use cash when buying food, household needs, haircuts, school fundraisers, and clothes.
Pull your cash out at the beginning of every pay period and try not to go back to the bank until you are paid again.
Look over all your bills one more time. Is there one area you could spend less? Could you eat out less and reach your big goal faster? Could you lower your utilities, save money and do that ONE thing you've always wanted to do?
Filter all your bills through that goal we talked about earlier. Let your goal be the motivation to cut back, not your budget. Once we learned our spending was getting in the way of our big goals and dreams, our life literally changed.
Income -Giving - BILLS = Money you have to Pay Debt and Save
What do we owe? Do you have a student loan or a car payment? Do you have credit cards with balances? Do you have a line of credit on your home? What about your home mortgage? Can you pay if off quickly?
Take as much money as possible after you pay your bills and throw it at your debt. We paid off all our debts in 18 months. It was hard work but worth it.
We think you should work towards being debt free. We love this book and have used it pay off our debt. We are diligently working on paying off our home now. It is a HUGE commitment and a slow process, but we know it will be worth it in the end.
What do we need to save for? At the bottom of our budget, I always have a list of upcoming events or needs our family needs to save cash for. For example, this year we really need to beef up our emergency fund by 5K. I'll be sure to move over a couple hundred dollars each month to beef up that account so that over the course of the year we can reach that goal.
Maybe we are planning for a vacation 4 months from now. I'll make a note of how much that trip will cost and move money into our travel savings account to ensure we have the cash to cover it.
I also do this for Christmas and birthdays. I will plan out months in advance to save up cash for home improvement projects or purchasing a new to us car.
Some months, we have a lot to put into our savings goals. Other months, we barely make a dent. Air conditioners break or kids get sick and the medical bills pile up! I've learned to not let that frustrate me. Progress is still progress no matter how slow it happens.
We struggled for years to use a budget. We had debt and our income was low and variable. After many attempts and failures, we finally came up with a simple and easy budget that works for us and it all centers around our GOALS.
We believe your income can be one of your biggest wealth building tools. Pay attention to your income and spend it wisely. It can go further and do more for you than you think!