Learning to Budget

[poohhbear1221]

I am a real newbie and looking to set up a budget any advice on how to get started.. I like this envelope thing but not sure on how it works.. any advice on how to get started so i can get out of this vicious cycle of spending Im in?

[disneysteve]

Re: Learning to Budget

The two most important aspects of developing a budget are knowing exactly how much money is coming in and exactly how much is going out and where it is going.

The coming in part is generally easy assuming you have a steady income source.

The going out part is where you need to do some work. Start by writing down every regular, recurring expense that you have. This includes things like rent/mortgage, taxes, utilities: phone, gas, electric, water, cable, internet, insurance premiums, tuition, etc.

Then get a little notebook, carry it with you at all times, and record every penny you spend on absolutely anything for a month.

At the end of the month, sit down with your lists and divide every expense into 2 categories: Want or Need. You need to be very specific here. Phone service is a Need. Caller ID, call forwarding, voice messaging, etc. are wants. Having a car is a Need. Getting it detailed every other month is a Want. Having a TV is a Need. Having premium digital cable and a 42" plasma screen is a Want. You get the idea.

Don't forget to include expenses that don't get paid monthly, like magazine subscriptions, insurance premiums, auto registration, club dues, etc.

So once you've done all of that, look at the bottom line. If your expenses are greater than your income, you need to take a good look at that Wants column and start cutting back. If your income is greater, you're off to a good start, but you may still need to trim the Wants if you aren't saving adequately.

Don't ignore that Needs column, though. Just because you need a phone, doesn't mean you currently have the cheapest plan. Just because you need life insurance doesn't mean you shouldn't shop around and see if you can find a cheaper policy.

[poohhbear1221]

Re: Learning to Budget

thanks for getting me started .. i get my check on the 3rd of the month so i can start everything at the beginning of october..

[LuxLiving]

Re: Learning to Budget

Before you get your check and before you spend a dime - plan on where that money has to go towards meeting your obligations. At the very least get a piece of paper and put your income in as a plus and start subtracting out what all the monthly obligations are.

I'm assuming you probably pay rent/mortgage/housing of some kind and it's most likely due on the first. Have you been paying behind on this? If so you'll need to do something towards saving back for that so that you're ahead of your November paycheck coming in on the third. If you plan ahead and can swing it you'll have money set aside for housing so you'll be able to pay it before it's due on November 1st.

Also, if you can, start thinking about putting a bit back for starting an Emergency Fund.

Good luck and stick around and don't be afraid to ask questions when you get stuck.

[autoxer]

Re: Learning to Budget

The going out part is where you need to do some work. Start by writing down every regular, recurring expense that you have. This includes things like rent/mortgage, taxes, utilities: phone, gas, electric, water, cable, internet, insurance premiums, tuition, etc.

Then get a little notebook, carry it with you at all times, and record every penny you spend on absolutely anything for a month.

At the end of the month, sit down with your lists and divide every expense into 2 categories: Want or Need.

Excellent advice. That is exactly what I did. After looking over my spending habits, I was able to prioritize what was important to me, and what I could do without.

any advice on how to get started so i can get out of this vicious cycle of spending Im in?

When I first tried to control my spending, I took all of the credit cards out of my wallet & put them in my sock drawer. I put myself on a cash allowance to pay for gas, food & entertainment. That was the only way to give me the self control to stop spending when the money ran out. What are some of your spending habits?

[jmjj215]

Re: Learning to Budget

Having a TV is a Need

I take friendly issue to this one. We haven't had a TV in the 3 1/2 years we've been married and it's great!

[disneysteve]

Re: Learning to Budget

I take friendly issue to this one. We haven't had a TV in the 3 1/2 years we've been married and it's great!

No argument here. I could happily live without one. But realistically, I think it's fair to consider it as a need for budget purposes. Very few people are willing to do without one. The problem comes when people spend ridiculous amounts for the set, then an equally ridiculous amount on cable service.

We've got a regular 25" TV we bought about 8 or 9 years ago. It cost about $250. And we had a roof antenna installed by the previous owner of our house, so no monthly fee. We did finally break down and get limited basic cable in February ($9.99/month). I would never spend more than that.

[Broken Arrow]

Re: Learning to Budget

I'm doing fine without cable so far.

See?

*twitch*

[scfr]

Re: Learning to Budget

Disneysteve's advice is spot on. Follow that advice and you can't go wrong. That's the first thing we did, 14 years ago, when getting our financial life on track, and it was the best first step we could have taken.

One thing to add, once you've done everything he mentioned: Start budgeting in advance for the "unexpecteds" either by setting up a general emergency fund, or by specific category.

For example, if you have a pet and you currently spend about $20 for it's food and other supplies, you could budget $40 per month and "bank" the extra. That way, if Fido or Fluffy come down with cancer in 3 years, you'll already have $720 saved & budgeted to treat that.

Same thing for car repairs, house repairs or upgrades, your own medical or dental, etc.

[disneysteve]

Re: Learning to Budget

One thing to add, once you've done everything he mentioned: Start budgeting in advance for the "unexpecteds" either by setting up a general emergency fund, or by specific category.

Same thing for car repairs, house repairs or upgrades, your own medical or dental, etc.

Very true. So many "emergencies" that get people in trouble really aren't emergencies. They are things that should be anticipated. Cars need to be repaired. People and pets get sick. Appliances break. Gift-giving events crop up.

I actually dislike the term "emergency fund" for just that reason. I prefer to just call it savings. You need to set aside a certain amount each month for "stuff" that is guaranteed to happen.

[creditcardfree]

Re: Learning to Budget

I actually dislike the term "emergency fund" for just that reason. I prefer to just call it savings. You need to set aside a certain amount each month for "stuff" that is guaranteed to happen.

I have a basic savings account for this. I've heard someone refer to it as a slush fund. I've picked a dollar amount to put into the slush fund each month and have it auto transfered to savings. It is just like any other bill to us.

[poohhbear1221]

Re: Learning to Budget

some of my regular expenses are rent/ electric/ cable/ phone and then i have my meds cause my insurance doesnt pay for it all.. also have a 80/20 medical insurance plan where i pay 20 percent.. and i have to see the doctor at least once a month because of diabetes.. other than that i usually just spend whatever i have.. it burns a hole in my pocket actually and that is something i want to get out of the habit of doing .. i also work in a grocery store so i get pretty good discount for food and it usually costs me approx 30 a week in groceries

[jmjj215]

Re: Learning to Budget

some of my regular expenses are rent/ electric/ cable/ phone and then i have my meds cause my insurance doesnt pay for it all.. also have a 80/20 medical insurance plan where i pay 20 percent.. and i have to see the doctor at least once a month because of diabetes.. other than that i usually just spend whatever i have.. it burns a hole in my pocket actually and that is something i want to get out of the habit of doing .. i also work in a grocery store so i get pretty good discount for food and it usually costs me approx 30 a week in groceries

Is that feeding just yourself -- or are there other mouths to feed?

Writing down everything I spend goes a long way for me.

[poohhbear1221]

Re: Learning to Budget

there are 3 of us here and i supply all the food and what not for the family

[jmjj215]

Re: Learning to Budget

there are 3 of us here and i supply all the food and what not for the family

that's a pretty slim budget for food!