Starting off Budgeting

[cjscully]

Hi folks.

I'm updating a guide to budgeting I wrote some time ago. One of the things I want to improve is the section on how to get started. There are a lot of folks who don't use budgets because they don't know how to get started. They're not very organized and can't seem to get their wits around keeping track of their expenses.

The reason I'm posting here is that my wife and I tend to be fairly organized people so I'm not sure our advice and tips are so workable for people who aren't that organized or who hate keeping lists or tracking their spending and so on.

If you had a hard time getting started on your budget and you now successfully operate off of a budget, please share your tips.

[fiscallyprudent]

i'd say track your income and expenses and set up realistic yet flexible allowances.

[SimplySaving]

I think the first step is to spend a couple months tracking your expenses. Be diligent about this. Use excel or personal finance software - make sure you categorize your spending. Label each of your purchases as "groceries" "dining out" "home maintenance" "home furnishings" "clothing" etc, etc. Then after each month figure out how much you've spent in each category. When you sit down to make your budget you can then see how much you have been spending, decide if those purchases were necessary and if you want to try to live on less in that category. Make your budget based on this. I recommend "the envelope system". Each month or each paycheck take out your budgeted amount for that month and put the cash in the envelope. This is the only way my husband and I have been able to stay on budget. Good luck!

[msi56]

Another important point to remember is to only count regular and reliable income when totalling your monthly income. For example don;t count money from odd jobs that you do because this figure will not be the same every month. It is better instead to simply add these amounts to your monthly savings if and when they do come in.

[scfr]

Tracking expenditures is the first step. Put a small notebook or piece of paper in your wallet, where you write it down every time you spend money. The key is that you have to put the paper someplace where you can't get to your cash, credit card, or debit card (whatever you pay with) without first removing the piece of paper. That way, you will never forget to record your expenditure.

(I have to use this technique with store credits or gift cards. Otherwise, I sometimes forget to use them when I get to the cash register.)

[disneysteve]

Originally Posted by cjscully

I'm not sure our advice and tips are so workable for people who aren't that organized or who hate keeping lists or tracking their spending

Originally Posted by fiscallyprudent

i'd say track your income and expenses

Originally Posted by SimplySaving

I think the first step is to spend a couple months tracking your expenses.

Originally Posted by scfr

Tracking expenditures is the first step.

I think you've got your answer, cjscully. It is impossible to devise a budget without knowing how much you spend. You absolutely MUST track your expenses to some extent. A budget is a spending plan. It lets you designate where each dollar is going. If you don't know how much you need for each category, how can you make a plan?

[Ima saver]

I have used the envelope method for over 40 years and it has always worked for me.

[Domain]

I have been living off a budget now for about 4 years. But before I got started it was very hard. My motivation to start a budget was, I got tired of living from pay check to pay check. Even after I got the motivation I was lost becasue I didn't know where to start. That was when I sat down with a financial advisor who walked me through setting up a budget. That was when I saw how must money I wasting each month, I saw it in black and white. Motivation alone won't do it,like everything consistency will be key. The other thing I found out was that everybody's situation is different. Find a system that works for you. I have used software, envelopes, jars, etc. Get some basics down like income, expenses, etc. Once you have that then you can customize your budget and find what works for you. Over the past 4 years I can't remember how many times I changed my budget. The more you do it the easier it gets. I am still a work in progress but budgeting has become alot easier.

[justinblake]

I only have one tip and it involves getting started. I always tell people to start making a list of their expenses and to keep track of what they shell out their money for. Once they do make a detailed list of every item they buy or pay for, they will see their excesses. They will see those non-essentials that take up so much of their budget if you add them all up.

[sarahgrace]

One thing that I can suggest about budgeting is to list down your expenses. Make it flexible and realistic. Always allot a certain amount of money for your luxuries and other expenses (which is not a necessity, this can be clothes or any other fees that you will only pay for that particular month) so you will not be shocked why you haven't saved anything. Just be realistic with your budget

[crazyskunk82]

I second all the stuff about being realistic and such. Also, an important step is to make sure you have an emergency fund. Maybe put $100 a month aside for the unexpected. It will keep your budget strong.

[riverwed070707]

One thing that was overwhelming for me when I started bugeting was just figuring out how to categorize everything. It would be helpful for you to list suggested categories to give them a starting place.

Not enough OR too many categories can complicate things. It's obviously important for the budget to be very detailed so you can actually find ways to cut back, but at the same time, I found it daunting to have to split household supplies from groceries since we almost always buy them at the same store (especially because my husband *never* keeps receipts). As a compromise, I just lump my groceries and household supplies (cleaning, tp, bath stuff, etc) into one category and only break out purchases that are significantly different like home improvement, pet supplies, and lawn and garden.

The categories I use for my budget are:
Mortgage
Utilities
Water/sewer/trash
Phone
TV
Internet
Furnishings/Appliances
Lawn/Garden
Home Maintenance
Car payments
Auto insurance
Fuel
Car Maintenance
Gym
Groceries/Household
Kids activities
Dining out
Pets
Day care
Entertainment (fun money)
Vacation/Travel
Student loan
Debt snowball
Gifts

I don't break out medical expenses becuase I pay for them with an HSA through a separate account my employer contributes to and I don't keep track of home insurance or taxes because they're paid from escrow. I also don't bother tracking static expenses deducted from my check like health insurance or retirement contributions. Its a lot of categories but I find it to be just detailed enough to really know where my money is going without being so detailed that I spend hours studying receipts and further breaking down the numbers. HTH

[landon.bruno]

I always start with bills, first I make a list of bills that I have and how much is due each month. Then list out how much I need for food, gas, and weekly allowance for work ie...lunch etc. Then put up at least 10% of take home money into a savings account. And then I subtract the amount of the money that is earned from the bills and savings. This is the amount of money I have each month to spend on extras.