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I do not follow Dave Ramsey's plan but I do listen to his show regularly and I'm very familiar with what he recommends. Being someone who doesn't follow a budget, though, I have a question. Maybe it is a stupid one but I figured I'd ask it anyway to better understand the process people use when making their budgets.
He teaches to sit down at the start of each month and create a budget for that month, assigning a job for every dollar that will come in. That sounds very nice but it isn't nearly as easy as it sounds on the surface. I don't know exactly how much money will come in each month and I don't know exactly what our expenses will be each month, so how would I actually make such a zero-balance budget? Or do you just include a big fudge factor in the budget to account for that variability? For example, I'm paid hourly so if I work an hour more or a half hour less one week, that alters my pay.
Dave says to pay food first, utilities second, and so on, but our food spending isn't the same each month. Our utility bills aren't identical every month. Some expenses are fixed like our mortgage payment or our cell phone bill but others are variable based on usage. I can't know on December 1 how much my water bill will be for the month. I have a general idea of the range but not a specific number. I can't control the price of gasoline. Today, it might be $3.25 but two weeks from now it could be $3.05 or $3.50 so how can I designate an amount for gasoline for the month?
So for those of you who budget in this manner, what am I missing? How do you make a budget when most of your expenses are variable? Or do you just create a general outline of a budget and adjust categories as the month goes on - if gas prices drop, you shift more money to food. If food spending is down, you shift money somewhere else.
He teaches to sit down at the start of each month and create a budget for that month, assigning a job for every dollar that will come in. That sounds very nice but it isn't nearly as easy as it sounds on the surface. I don't know exactly how much money will come in each month and I don't know exactly what our expenses will be each month, so how would I actually make such a zero-balance budget? Or do you just include a big fudge factor in the budget to account for that variability? For example, I'm paid hourly so if I work an hour more or a half hour less one week, that alters my pay.
Dave says to pay food first, utilities second, and so on, but our food spending isn't the same each month. Our utility bills aren't identical every month. Some expenses are fixed like our mortgage payment or our cell phone bill but others are variable based on usage. I can't know on December 1 how much my water bill will be for the month. I have a general idea of the range but not a specific number. I can't control the price of gasoline. Today, it might be $3.25 but two weeks from now it could be $3.05 or $3.50 so how can I designate an amount for gasoline for the month?
So for those of you who budget in this manner, what am I missing? How do you make a budget when most of your expenses are variable? Or do you just create a general outline of a budget and adjust categories as the month goes on - if gas prices drop, you shift more money to food. If food spending is down, you shift money somewhere else.
), then less might go into savings for the month. If we go out to dinner for DW's birthday, that money is gone so it can't be used for some other purpose. I just don't always know from month to month, or even week to week, what the outlier expenses are going to be.
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