Everyone should have one of these….

A house? Nope.

A car? Nope.

A cell phone? Nope.

A daily shower? Yes…but that’s not what I’m getting at here (it is summer after all!)


A BUDGET! I know, I know…. it’s a horrible word.  The kind of word that makes people feel constrained and limited.  However, that’s not what a budget actually is.

A budget is simply a plan for where your money goes before it just disappears and you end up “broke until payday” with bills that need paid. This is not a situation anyone wants to be in, yet many people are.

So how do you make a budget?  First, you have to know what your income is, how often you receive it, and what all your expenses are.

You can set up an excel sheet or just use good old pen and paper for this.  I prefer the pen and paper method where my husband prefers the excel sheet.

  1. Income: List all your EXPECTED income for the month.  “Expected” being a key word.  Don’t add in any overtime you *think* you will be getting or that $50 your friend owes you.  JUST your expected income.  Your paycheck amount, social security, disability, etc.  **don’t put child support in with income.  It is never a 100% guarantee that your child’s father/mother will pay you what and when they are supposed to**  Now you know how much money you have to work with this month.
  2. Expenses (4 walls): Start listing your expenses that fall into the “4 walls” category.  This category ONLY includes things that are basic needs.  NEEDS, not wants.  Things to include in this section is: Rent/mortgage, electric/water/propane/natural gas, homeowners/renters insurance, car payment, car insurance, gas, food (groceries, not eating out), and basic clothing (again, NEEDS, not wants).  Anything that you NEED to cover housing, food, transportation, and clothing.  If you don’t eat, have a place to live, have a way to and from a job, or clothes to wear…you cant survive.  THAT is what the “4 walls” covers.  What you NEED to survive.  See the pattern? NEEDS not WANTS.
  3. Expenses (the rest):  Now you list all the rest of your expenses that you have each month.  Things like internet, cell phones, hair cuts, entertainment, eating out, and so on. **THIS IS WHERE YOUR DEBT GOES!  Don’t forget about any monthly debt payments like credit cards and student loans**
  4. Balance it out: Now, add up all your expenses and that total should be LESS than your income.  If your expenses are MORE than your income, you need to cut somewhere.  Always always always reduce or cut out the expenses that DON’T fall into the “4 walls”. If you want to keep an expense category where it is instead of cutting it down or out, then see where you may be able to make adjustments.  Can you call around for insurance quotes and reduce that monthly cost?  Can you change your cell phone plan?
  5. Stick to it: As you go through the month, keep your receipts and see how you are doing.  If you spend higher one week for groceries, aim to spend a much lower amount the next week.  By sticking to your budget, you are much less likely to have those moments of “Oh $&!#!!! Now what?”.  You are less likely to have to eat ketchup sandwiches for a week because you spent your money on things you cant even remember.
  6. Evaluate: At the end of each month sit down and look at how you did.  Were you over in groceries but under in gas?  Change the amounts you have budgeted for the next month to reflect this.  It can take 3-6 months to find the right balance in your budget. This is when you can plan for using any extra income you had for the month.  Is Christmas coming up and you want to buy gifts?  Do you have a vacation you are saving for?  Do you want to pay down some debt?  Plan where this extra money is going to go to and follow through.

By having a budget, and sticking to it, you will know what you can and can’t afford to do.  Having this knowledge is a huge stress relief.  Even if you can’t afford everything that you WANT, it’s better than falling behind on the bills and suddenly not having a place to live or a way to get to work.



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