First things first, you need to GET ORGANIZED. Go gather up all your bills, yes the gas bill, water bill, student loans, credit cards, mortgage/rent, all of 'em! Now separate them into 3 piles: "Bills" this includes things like utilities and rent/mortgage, "Debt" this includes credit cards and loans (list this category from smallest to largest and add in the interest rates some where along the side), "Other" this includes things like memberships (gym/club, organizations) and activities (bowling leagues, kids soccer fees). Once you have them sorted make a list (either on a sheet of paper or in Excel) using the headers: "Bills" "Debt," and "Other." Now go down that list and first enter in any static costs (ex: Newspaper - $8.24/mo) then make your best estimate for those dynamic bills (ex: Gas - $60/mo) like utilities. For dynamic costs I like to estimate up by $5-10 to give me a little cushion in my budget. Now add them up! This is where Excel comes in VERY handy but a pencil and calculator can suffice, or if your really up to it go at it without the calculator! First do a total by individual category and then add all the categories together. Below these totals add a new header "Income." I have a relatively static income as a full-time hourly employee so I enter in a typical take home paycheck amount without overtime or time off. My husband on the other hand has a dynamic income as his pay is based off commissions. For this I give a rough estimate which is generally on the lower end. Now, subtract your monthly expenses from your income. This new amount becomes what you will draw from for things like groceries/household expenses, gas, eating out, entertainment and you get the picture!
Now you need to GET REAL with yourself! Clearly you have made the decision to control your spending so Starbucks 5 days/wk is probably not the most cost conscious spending decision but if you know you can't control yourself you need to pencil this expense in. Some people can go cold turkey with frivolous expenses (I am not one of them) but this is where many people bust the budget and give up. Are you willing to compromise? Say Starbucks 2days/wk and home brew the rest of the week? How often are you eating out? Can you make a commitment to only eating out 1 or 2 meals/wk? Again expectations that are to high end in disappointment. It's the sad truth and you just need to realize it now so you are prepared for it. I recommend listing these categories by priority, for example you need groceries/household items and gas or bus fare more then you need that Starbucks (no you can't win this argument!). Also take into consideration here things that you should be saving for in the future such as car repairs, medical expenses, car registration and license renewal, tax preparation, maybe a vacation or new piece of furniture or new car or house. Just remember to keep it real, if you over budget for something or budget for something you didn't end up needing you can either roll it over to next month, spend it on something else or snowball it (we'll get to this next). But if you forget to budget for something it can be hard to find extra cash to pay for it later.
So you say you have some money left over? Good, we call this our snowball and there's a few different things we can do with this but that is for another day. For now look over your accomplishment and make sure it is something you can live with. I do want to warn you that in the first few months things will not go the way you planned. Expenses will come up and some numbers will require tweaking but don't give up. Rome wasn't built in a day and the perfect budget won't be written in one either. Also keep in mind that your budget will and should change from month to month. I re-evaluate our budget the 1st (or 2nd or sometimes 7th :-/ ) of each month because our needs change. For example this month is my sons birthday and we are planning an extra special gift for him so I put that expense into the budget. Treat the budget like a member of your family and visit it often.
-Valerie
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