Budgeting - Have a Plan for Your Money

Some people don't like the word budget. I'm not crazy about it either. The word budget sounds restrictive, it sounds limiting, it sounds no fun at all.

But a budget is a plan for your money. And I like the word plan a lot better.

To win with money, you want to start thinking more long-term. A budget will help you do that.

Part of thinking long-term is piling up some money so you pay more than the minimum payment on a credit card. If you forget about the credit card bill until it comes in the mail, you won't have any extra money set aside to get it paid off quicker.

It's the same with a car payment, or with any other kind of loan. You want to plan ahead for expenses, holidays, and special occasions. Birthdays are always on the same day. So is Christmas.

Think about how much money you spend for occasions like that and set aside money in advance. Just to make an example, if you typically spend $1,000 on Christmas and you can set aside $200 a month, you would start saving for Christmas in August. (5 months x $200 a month)

This way you don't have to pay for Christmas with a credit card and go into more debt.

There are many different methods to making a budget. An online search will give you many examples. I'm going to suggest a zero-based budget.

You start with your income. You want your income minus your expenses to equal zero. With this method, you have a plan for every dollar you make. If you have $300 just floating around with nothing for it to do, it will probably be wasted and you will wonder where it went.

This doesn't mean you end up with zero dollars in your checking account. I recommend keeping at least 1,000 to 2,000 in your checking account at all times. It's there to catch unexpected expenses. If you go below 1,000 you should stop paying debt until there is at least 1,000 dollars in there.

Let's look at an example of a budget. You can find plenty of printable templates of budgets for free, or you can use a spreadsheet or pen and paper and calculator. Find the process that works for you.

These numbers are not meant to be realistic or accurate. This is just an example to show what a budget might look like. You would use your own numbers.

Notice that shelter, utilities, and food are first. You want to take care of those basic needs before anything else. If something happens like a job loss, you would pause paying off debt. The credit card companies can wait. You have to keep your house (your shelter) and eat.

Notice that after monthly expenses we have 2,160 dollars left. In this example, we are paying off credit card debt so the remaining 340 dollars goes to that.

We have a plan for every dollar of our 2,500 a month income and our current goal is paying off credit card debt.

We pay debts smallest to largest. Once a debt is gone we move to the second smallest debt and so on.

You want to do a new budget every month. Some of your expenses will always be about the same, so it will get easier. It might take a few months for the process to go smoothly.

Feel free to contact me with any questions and I will try to help.