After my last post in this Frugal Living series, Cash Family, a reader asked about how to make a budget. This really is such an important step in managing your finances, especially when you are trying to be frugal! I am by no means an expert on budgeting, but Chris has a B.S. in Business, which required him to study budgeting, so he has made our budget and he keeps it updated. Lucky me!
I've learned the basics so here goes.
We made our budget using Excel and it is quite helpful to use a program like that if you are familiar with one. If not, you can just do all the math yourself!
First, write down your bring-home pay for each month. (Tip: When we got married, we knew we wanted me to be able to stay home once we had little ones, so we never factored my paychecks into our monthly budget. We made sure we could live on Chris's salary and counted my income as extra - savings, etc. - so that it would not require a huge adjustment for us financially when I became a stay-at-home mom.)
Second, calculate your tithe. (This step applies to Christian readers.) The Bible talks about tithing and while there is some debate regarding the amount we should tithe, many go with 10% as that is what the word "tithe" means, and we stick with that. We take 10% of our income before taxes and give it to our church and organizations like World Vision and the International Justice Mission. Write down the amount of your monthly tithe.
Third, write down your monthly recurring bills as those are pretty much set each month. This will be things like:
Utilities (electric, gas, water)
Insurance (home, car, etc.)
Phone (cell, landline)
Debt (student loans, credit card)
Once you subtract your tithe and recurring bills from your bring-home pay, you will know how much money you have for everything else each month.
At this point, you can divide up that remaining money into the rest of your budget categories. You can sort of guess how much you might use in each category if you don't know. The rest of your categories might include:
Kids (diapers, formula, etc.)
Miscellaneous (this can be used for random extras that come up like birthday gifts, etc.)
For a couple of months after we made our budget, we kept track of everything we spent. That way, you can readjust your budget and move money around as needed until you find what works for you.
I hope this is helpful to somebody! Do you have any budget tips to share?