Setting Up Your Budget

Friday, April 9, 2010

Setting up a budget is the best way to monitor how much money is coming in versus how much is going out each month. Today, I will help you customize your budget to meet your individual needs, and maximize your income. This can be helpful whether you are trying to stay home with your children, already staying home with your children, or you are just wondering what we all wonder, “Where does all of my money go?!”

Using Microsoft Excel, set up columns starting with A for Expense Name, B for usernames and passwords, and C, D, E, etc. for the months of the year. Set up the rows starting with row 3 for your monthly cyclical bills such as mortgage, cell phone payment, electricity, etc. After you are finished listing the cyclical bills that change from month-to-month, add bills that you incur each month like vehicle gas, groceries, entertainment, and clothing.

Once you have set up your spreadsheet, pull your online banking statement up, and print one month’s worth of banking statements. For example, March 1st – April 1st. The easiest way to single out expenses is with a colored highlighter. Highlight all grocery trips with pink, all gas expenses with yellow, etc. Add all of the pink expenses for one month together to figure out what you are spending on groceries. Add all yellow line items to pinpoint what you are spending in gas, and so on. Do this for every single line item on the statement. If you have rare expenses like vehicle registration, it is a good idea to budget a certain amount of money as “miscellaneous” in your budget. This way, nothing is truly a surprise if you budget for it.

At the bottom of your spreadsheet, add a “TOTAL” row. Add all of your expenses in the “March” column and put the total in your “Total” row. Below the total, add a row for “INCOME.” Put your monthly income in the row. Add a “LEFTOVER” row below the Income row. Subtract the TOTAL from the INCOME and this will be what you have for savings, or emergency situations every month after everything has been paid for.

The most important thing is to be realistic about your budget. Don’t cheap out if you REALLY spend $200 on clothing each month and put “$100” as this is not a realistic view of your spending.

If you look over your bank statement and see that you spend $400 on entertainment and eating out, perhaps you’d rather cut this line item to $300 and eat in or rent movies more often. There are a lot of ways to trim your expenses once you know what they are!

Take a couple of hours and sit down to put your budget on paper. You will sleep easier knowing precisely where your money is going and how you can keep more of that money in your pocket!