Can you afford what you really want? Can you pay cash for your dream or are you co-dependent on plastic? Do you have a budget? With the holidays, budgeting sometimes starts in January. Why wait? The strategies to better budgeting requires creating a plan now.
We have a tendency to start the year off strong and by February, we fall back into old habits. If you have a goal, write it down and refer back to it — OFTEN.
Consider creating a financial vision board to hold you accountable.
And….Don’t compare your lifestyle to someone else’s. You don’ t know their financial story. They could be robbing Peter to pay Paul, maxed out on credit cards, living on loans, have an inheritance, or living off interest from an investment.
Growing UP without a budget
Unfortunately, I knew my parents struggled financially, despite them both working full time. They lived paycheck to paycheck and although it was just the three of us, money was scarce, even for the smallest of things. Yet, my parents made it work and I never went without anything.
We didn’t take family vacations or live in a fancy house, and our family cars were either hoopties or fixer uppers. I never heard my parents talk about money. Budgeting was not something they they talked about with me or taught me how to do. I learned in college. My mom sent me $20 a month and I had an on campus job that paid $125 a month. Living off $145 a month quickly taught me how to manage my money.
budgeting experience
As an educator married to a first responder, neither of us are bringing in a six-figure income, individually but, we are financially comfortable. We know how to manage our money so that we have a surplus every month.
In the early days of our marriage, there were some months when we were operating in the red. We were young and wanted to live a champagne lifestyle on a beer budget! Those experiences taught us how to better manage our money.
budgeting TIPS
- Always live below your means. Making more money doesn’t mean you have more money to spend; it means you have more money to put into savings.
- Always pay yourself FIRST. Select a certain percentage (5% to 10%) of your net income and pay yourself before paying bills.
- Diversify with MULTIPLE account types – interest earning checking account, savings, CD, IRA, etc.
- List all income and expenses. Income should always be more than expenses.
- Document all transactions. Review your bank accounts for all activity and make sure you have fraud detection on all accounts.
budget and income tidbits
Budgeting is a science and an art. Select the method that is best for you and your family because it is not a one size fits all. Whether you get paid weekly, bi-weekly, monthly, or bi-monthly, your budget should be based on your net income. This budgeting calendar can help with monthly income and expenses.
Hourly – Let’s say you work 40 hours a week at $10hr. That equates to $400 weekly and $1600 monthly, gross pay. Let’s say your net pay is 85% of the $1600. That would give you a net income of $1360 monthly. Therefore, your monthly budget is based on $1360. Anything over that should go into savings or an emergency fund.
Salary – Anything over your regular salary — bonuses, stipends — is extra and should be put away for savings. Let’s say your annual salary is $75,000, gross pay. Your net or bring home pay is 85% of $75,000 which equals to $63,750. That is $5,312.50 monthly. Remember to pay yourself first so before any bills are paid, pay yourself 5% to 10% of your monthly salary which, for this example, at 10% would be $531.25. This goes into savings. Once bills and other expenses have been covered, anything else is extra.
budgeting discipline
Discipline strategies my husband and I have used to ensure we are always operating in the black, every month.
- Coin Jar. Keep a mason jar, a water jug, or something similar in your laundry room and in your closet. Once it’s full, deposit the coins into your savings account.
- Stipends, bonuses, tax refunds are not guaranteed income and should not be added to your budget. Use that to pay off debt, add to your savings, add to your 529 account for your child’s college fund, pay an extra mortgage note for the year, or in any way that allows you be one step closer to being debt free.
- Credit vs Debit Card. Consider only using your debit card for the same consistent purchases to help monitor spending (i.e. gas, groceries, personal hygiene items).
- The Envelope System — Label envelops. Write what the money was for and only spend the money in the envelops for the designated categories. When you have used all the money, try not to pull from another envelope.
- Google or Excel Spreadsheet — The first week of January, evaluate your spreadsheet to see how much you spent the previous year in every category. This helps you decide what to eliminate. It helped my us save money on dining out, cash withdrawals, and subscription services.
Does budgeting feel like a mystery to you? I’ve got you.
budgeting TOOLS
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