Setting up a budget

[dcmustang00]

I'm in the process of setting up a new budget and would like to ask an opinion of everyone.

Would it be a good idea to budget the highest price paid for a bill for each month and then save the remaining?

For example, I have an electric bill that ran $230 on month in the summer. I take an actual amount, $150, and save the remaining $80 straight to a money market account gaining interest. This would been done with all bills at are paid monthly.

[eisor]

If you can afford it, I'd say go for it. I've always heard to do the average. But, by rounding up, you'll end up with a lot more money in savings!

[Aleta]

I look back over a 12 month period and add up the amounts and divide by 12 to get an average. If you know that your electric company is raising rates, you will need to adjust for that. Let's say that my average bill was $120.00 and this months bill was $85.00; I would transfer the difference of $35.00 to your savings account and I would have an account just for this bill. I always round mine up when I average out bills.

[disneysteve]

If your goal is just to be sure you always have enough money on hand to pay the bills, using the average will probably work. For the months when the bill is below the average, you set aside the extra and then spend it when the bill is above average.

If, however, your goal is also to build savings (and your income allows for it), what you suggest is a great idea.

[dcmustang00]

What would be recommended when setting up a budget that has one person being paid monthly and the other bi-weekly?

[skydivingchic]

You need to figure out what your total monthly income is, counting both people's paychecks. If one of both of you gets commission, set your budget up to cover everything based on the lowest commissions. Then the months that commissions are high, you can sock the extra in savings.

I recently completed my "monthly funding stash." I am paid biweekly and until recently the first check of the month was used to pay groceries, gas, utilites, etc, while the second check of the month was allocated for the mortgage and HOA fees. Now, the checks that get deposited in September don't get touched until October. On October 1, I allocate money to all my envelopes for the entire month and October's checks get put aside for November's expenses. That makes things easier - doesn't matter what day I get paid or what day bills are due - the money for everything is there on the 1st.

Also, with the biweekly pay period, you might try to set up your budget to use only 24 of those paychecks (2 each month). That way there are 2 "extra" paychecks every year that can be saved or used for larger purchases.

[Diolla]

I run my budget in a cash flow style, all the income and monthly bills are put into a speadsheet and then I sort by the date. Put in a starting balance and add the income/subtract the outgo and do a running balance. Then where I can I will insert extra savings and set up transfers.

Since most of my bills are the same or almost the same every month it takes me about 15 minutes to set it up. I always do it in advance of the month starting so I know there is money there for everything.

I also have most of my bills automatically paid (pushed) by the bank so once everything is set up (I use cash envelopes for my spending money) I don't have to do anything the rest of the month.