Let me start this post on budgeting by saying I am no finance expert. The point of this blog is to share things we do in our home that keep us on track in life and point us to the Lord. A budget is one of these things, and it is a foundation for so much! So many couples we know do not have a budget or fight about money, or do not even share their money like a family, they keep it separate. So here are my thoughts and tips on the Family Budget.
Why Would I Need a Budget?
If you have no plans in life and do not want to have any plans or goals in life, then you probably do not need a budget. However, if you would like to one day retire (or your spouse), pay for your children’s college, go on a vacation, give money to those in need, own your house, eat food, etc. A budget is a good idea. In general people spend what they make, so unless you are the actual creator of money, there is a limit to your ability to spend. So yes, to have any goals or plan in life, a budget is extremely helpful.
Where Does Your Money Go?
Let’s start at ground zero. Assume you have no budget, no clue what you even spend your money on. You buy what you “need” and go on with life. Start this month by tracking EVERYTHING you spend money on. Just start with paper and pencil and write it down. This includes your utilities, food, clothes, gas, car repair, and yes, even that latte from Starbucks. At the end of the month you can categorize where all your money went and see how much you are spending in each category. This is the start of a budget.
Your Initial Budget
If this is your first time to make a budget, start with your month you tracked money and identify which categories are ‘fixed’ (tv, internet, mortgage etc.), all the other categories are flexible. This is where the fun (or stress) comes in. You get to look at your plan and goals for life and decide how much money each flexible category gets. At the end of your budget, your expenses (including savings, taxes, and retirement) should equal your income. Re-evaluate and adjust your budget ever couple of months until you feel like it is on target, then you only need to re-evaluate it once a year (or every time your income changes).
You can use paper and pencil for this, a spreadsheet, or an online money management program. We use a spreadsheet that we update annually and we use Mint every day to track our budget and spending.
Watching Your Budget
For a budget to be effective you must KNOW what is in your budget and TRACK your expenses. We use Mint to do this. Every transaction that is entered into Mint is categorized into one of our budget categories. Mint gives up to date information on how you are doing in each category and our overall budget.
Once you know where your money is going and have your finances under control, you can start making wise financial decisions towards your plans and goals in life. The budget is the first step.
Like I said, I am not an expert in financial management and these are just some thoughts on what works for us. If you have debt or want to learn more about finances and budgeting I would recommend Crown Financial Ministries. They provide a wealth of information and financial help. Much of what Crown Finanical Ministries offers is free or inexpensive. Another option that has grown quite popular is Dave Ramesy’s Financial Peace University. This however cost significantly more than what Crown Financial Ministries offers, but if you like humor it may be the way to go.