Budget

We follow Dave Ramsey's Financial Peace program (or Total Money Makeover). We basically just utilized his outline and estimated what we'd prefer to spend in each category.

Hi M.,

Making a budget is fairly straightforward; sticking to it is not. You may want to consider taking a month to do some research. Keep a journal of everything you spend money on and how much. Include things like the biggies--food, rent/mortgage, gasoline--as well as the fun stuff--movies, books, fast food, etc. At the end of a month, evealuate your spending. What was food running you, on average, for a week? How much did you spend on fast food?

Next, look at your income vs. your expenses. Ideally, you should be spending less than you make. If you're not, and using credit to buy stuff, you should consider cutting back on your expenses so you can live within your means and save a little each month. The goal should be living as debt-free as possible.

The most important rule in making a budget is being realistic. My food budget stands at $150/week for a family of four. We eat simply...no soda, no cookies or candy, lots of fresh fruits and vegetables. Some weeks I'm over, some I'm under, but it all works out by the end of the month. Pad this budget item a bit to cover any seasonal fluctuations. Same for gasoline. Track how much you spend and plan accordingly. For my family, it's one tank per week per vehicle. Pad this a bit, too, to cover any unexpected trips. Take a look at where you sepnd your "extra" money. Are you spending $20 a week at fast food? Dining out? For me, the killer is the bookstore. I could spend $50 a week on new books!

Once you've evaluated everything, make a list of money spent, cutting where you need to so you live within your means. This is the surprising part, where you can save money and where you can't. For my family, this process has led to new, more feul efficient cars, and once, a new, less expensive house. With the tough economic times, we've had to cut back on driving to be able to afford food. The AC is set higher, the heater in winter is set lower. We cut back on water use in the yard. The list is endless and sometimes depressing.

But, we're realistic. We didn't cut fast food out entirely, knowing there would be times when that's the best option for dinner on a busy night. But, we did try to find quick easy meals at home. Is the budget perfect? No. But, I have a very good idea of how much I spend each month and where I spend my money.

It's a discipline. Watching your savings grow is often a great motivator. Watching your credit card debt disappear is better. But, if you can master this discipline, life will be much less stressful.

I hope this all made sense. I teach a personal finance class to high schoolers, so it's a subject I know well, if not always practice!

Good luck!

Suze Orman's "Nine Steps to Financial Freedom" (I recommend the audio version). Spells it all out, literally changed my life. Super easy, lots of real-people examples. Cuts thru the blah blah. Audio book very good car listening. Listen to it a minimum of three times, you can do it. The lightbulb will go off.

My husband and I just went thru a "financial peace" class by Dave Ramsey and it is awesome! He's a Christian so he talks thru principles from the Bible, (don't know if that's something that is ok with you) anyway, it's pretty extreme, no credit cards, no debt, no buying ANYTHING you can't afford with cash, but it absolutely works. We're on our 4th month of it now, we have no debt besides our house and we're living on a reasonable budget. He has suggestions for how much of your income should go to each portion of your budget, percentage wise, and has an online program to help you keep track. I highly suggest this guy's program for anyone, my parents are actually doing it now and they've, after 2 months, payed off 3 credit cards, there's nothing tricky or magical about it, but he's very serious about what he teaches because he was bankrupt like 20 years back. He has a strong conviction about helping people get out of debt and live on their means and has multiple resources to help people do so. Just google his name and it'll take you to his website. Oh and he has a CD series (probably everything that's in his book) and he's very witty and funny, so totally easy to listen to, if you and your husband aren't readers. Good luck!

Hi, M..

My first question to you is, do you use any financial tool to currently track where your money is being spent (Quicken/MS Money)?

If you aren't you need start.

Go back the last three months and get an average of where all of your money is being spent. This should give you an idea what you generally spend.

Create categories of all of your expenses(rent, gas, water, credit cards, groceries, lunch, restaurants, etc.).

Good luck with your new budget.

K.

My husband and I decided on a budget when we first got engaged because each of us had some debt we needed to get rid of, a wedding to plan for and a house to save up for. The budget has evolved over the years but since having a budget, our lifestyles in spending have changed for the better!

The first thing we did was purchase some personal accounting software. We use Microsoft Money, but there are so many out there, even free ones! I've heard www.yodlee.com is good. It will take some time to load everything on there (all of your checking/savings accounts, retirement accounts, loans, bills, etc). But this is time well spent. Plan on a few nights working together on this.

Then, examine your current spending habits. Since you have it loaded on a personal accounting program, this should be relatively easy to do. Identify by category where your money goes. e.g. dining out, clothing, gasoline, car payment, etc. Also, idenitfy how much you are saving.

Thirdly, identify your savings goals. Do you want to buy a house, save for college, retire early, build up your savings 'cushion', pay off debt, etc. How much is it? When do you want to have this money saved by?

Next, identify those categories in your budget that you feel you and your family can work on reducing. Brainstorm ideas and enlist the family to come up with solutions. Some ideas: clip coupons, only buy clothing on sale, set a dollar limit on gifts, leave the credit card at home, wash your own car, etc. Take that dollar amount and compare it to your savings goals. Do these numbers mesh? If so, congratulations, you have a budget! If not, make adjustments!

Finally, have the family make a commitment to changing spending habits. Review the budget monthly. Enjoy having more money in your pocket!

Good luck!

One of the things that we started doing that really helped once we established a budget was to make it a cash one. I have a small labeled file folder ("groceries", "gas", "eating out", "medical", etc) and I put X amount of cash in them every paycheck and budget it as to get us through to the next payday. It really helped because I saw what we were spending, and when the money's gone, well, it's gone.

As for establishing one . . . we are currently only a family of 3 (for a few more months, lol), so my numbers won't help you. I just tried to guesstimate what I was spending on things, put that much aside, and tweaked as necessary.

Good luck!

hi there, i know you have a lot of responses but i'll briefly share a very effecient and doable budget. We followed the envelope system from Dave Ramsey I believe and it works awesome. My hubs has been a SAHD for about 6 years and thats what worked for us for a while. :) good luck.

These are all reat responses. We too have a budget and when we started, the best thing to do was track how much we spent in a month before deciding what to put down. (And as the kids have grown, the budget has had to change).
The amount one spends on food depends on what you eat, how much each person eats, and how often you cook or buy prepared meals.

Do you have a history of what you have been spending?? I use quicken, but there are lots of programs that can help you with this. I use my credit card for everything so that I can have traceability to what I am spending. Cash just evaporates, but a credit card record can be downloaded and categorized. At first, it takes alot of effort to set up the categories and stuff, but once you get going, you can download and categorize in a jiffy because the program remembers the vendors and the categories that you have used in the past. You can set up your checking accounts, too, so you can keep track of your electric bill, etc. I would recommend that you start this as you set your goals so that you can track your progress.

As far as where to cut expenses, I don't know how much wiggle room there is for food (ya gotta eat, right??) unless you are eating out often, or using a lot of convenience foods, which tend to be expensive. Once you see where every single dollar goes, you might opt to cut out starbucks or dollar store trips or get a new cell phone plan or cut out your home phone service completely. Good luck with your budgeting!

Hi my name is E. Lozano and I write many articles regarding personal finance, budgets, parenting and how to balance it all! Check out my articles at DivineCaroline.com

http://www.divinecaroline.com/member_workspace/articles

Well, are you currently cooking your own dinners now? If you are, take what you've spent on shopping the last 6 mos. and average it out. Then make adjustments as necessary---do you buy lots of stuff at the grocery store that you really don't need? Do you buy your household things there instead of a discount store? Adjust it out of your average. If you're trying to save money, make a menu plan based on the specials at the store you shop at, make your list and only get what's on your list. Don't buy those extras or those impulse items. Good luck!

I was in debt over my head and had about 10 credir cards go to the collectin agency. This was about 5 years ago and it had gotten so bad I stopped opening my mail altogether. I was serving tables and making great money and never felt the need to budget or save money. It wasn't until I got pregnant that I realized I couldn't run from it anymore and instead of trying to bankrupt, which everyone was telling me to do, I managed to create a budget template in an Excel Spreadsheet that really worked for me. I was able to see where my money was going and it was simply a miracle. This last year I finally have all my old debt paid off and it's the best feeling in the world. I have different budget templates saved because all my friends and family are wanting me to do their budgets too. I would be more than happy to email them to you if you like. You can look and see if it's something that may work for you. Let me know, I'd be more than happy to help =)

L.

This isn't much, but our biggest $ saver is not eating out much. I cook a lot more at home and the leftovers keep us from going out to lunch. A crock pot is a big time saver if you are working full time.
We determine if it something we NEED or just something we want. I've really cut down on buying books and magazines and go to the library more. As for movies rentals, we joined netflix instead of hitting Hollywood video-so easy and much cheaper. We have the base package $4.99/month and we get 6-8 movies a month depending on how fast we watch them. Our cell phones are prepaid so that limits how much we use them. We tell our kids no a lot more and have opened up savings accounts for them so they can work towards purchasing those items they want. It helps them learn to manage their money and stick toa budget too. I think they also appreciate the things more when they earn it.
I wait to buy things when they are on sale and am getting back into coupons. I try to go out and do my shopping on one day. I find that if I go to this store one day and that store another day, I buy things we don't need and spend more on gas. Make a list and stick to it. My last trip to the store was $170 with coupons and will last us 3-4 weeks (with the exception of going back for milk and bread). I buy store brands for most things like medicines, ziploc bags, etc. They are the same and save money.

The only addition I can make to the responses you've gotten so far is this: if you're going to track the next month and how much you spend, keep a journal on spending as well. Fill it out each day, with the money you've spent and where, and any comments you can make about whether or not it seemed worth it, or if it was a foolish purchase, etc. Once a week or so, review to see if you used all the stuff you spent. For example, on Saturday, I go back through the fridge to see if I didn't use vegetables I bought, etc.

This should help you see, at the end of the month, how much room there is to cut expenses and how much you really should be budgeting toward certain things. Although you might spend $400 on food one month, you might realize that you're overbuying on certain things by, say, 25%. Adjust your budget accordingly. Having a little system of checks and balances really helps you keep a handle on spending and helps you spend your money more efficiently. You might be spending the same amount of money, but on stuff you really need--or want!

Hi M.,
You have a lot of good responses here already, so I'll just keep my response short. First you would need to figure out what you're spending now, list your bills for the month and what your expenses are (include a cushion of a hundred dollars for unexpected expenses). Then, look at where you can cut costs (like Starbucks, eating out, personal expenses, etc.) and limit yourself to it. I have a family of 3 and we keep our grocery budget to $100 each week. We go over by about $5 sometimes, but thats part of the cushion. :) I have a really useful spreadsheet I can email you so you can work out your budget list (with projected/actual expenses) and I also use a great software called Budget Express 3. It's wonderful and so easy to use! Just email me at ____@____.com if you want a copy of this stuff. :)
J.

Start keeping your recipts for a month and add them up at the end to see what you spend. I have a budget I use every month. Send me a message and I will e-mail it to you. You can use my numbers as a guide and delete the items you do not regularly pay for.

Hi M.,
As for groceries, I go to Fresh & Easy every other day. I no longer freeze food as we tend to throw a lot away that way. I just buy what we need and like it better that way. I spend about $240 for my husband myself and baby and sometimes my adult daughter. I was spending that much a week in costco which sometimes included diapers and maybe a pair of jeans, but diapers are no longer needed here.

I do a lot of tracking and that is where I see we need to cut back. However, if you have boys who are big eaters, you can't do much about that...$240 won't cut it. Sometimes it is the little things we spend money on that causes our budgets to go over. We have a truck and when gas prices went up, I bought a little economical car and I drive that car all the time. I also cut back on a lot of my driving. Although I had to pay for a car, it will only take about 2 years to pay for itself if gas prices stay where they are.

If you need help with something specific I am glad to help. I lived on a very tight budget before I was married and we did just fine with finding things on sale.

C.

We are a family of four, and I think that Financial Peace University is the best way to go! I have the whole set of books, CD's and DVD's. Maybe I can help you atleast get started. Feel free to contact me if you like. I wish you all the best. God bless!
____@____.com

I agree on the cash budget. We have been doing that for about a year and it is great. We "pay" ourselves on the 1st and 15th. We are also a family of 4 and when we set up our budget we started out by seeing what we spent in a typical month. Make sure to put in money for haircuts, birthday gifts and even a little for unexpected things. We separate ours in a small file folder with the following catergories: Groceries, Household (this is for oil changes in the car, office supplies, etc), Clothing, Animal care, Hair Care, Entertainment. I am also a stay at home mom so I don't bring in any money (my job is priceless :-) ) so my husband and I agree that what is leftover from the budget is mine to keep! Its like a little reward for me! I hope this helps and if you have any questions please feel free to contact me!