Ready, set — Budget!

Ready…

What do you spend?

It’s important that our budgets be realistic. They should reflect the way we live and get our money planned, so we’re accomplishing our goals for saving, bill paying, and living a life we enjoy.

This means, we have to look at how we already spend money. The best way to start is to look at your spending patterns the past few month (or a couple months, if you like to dig deep). It’s fairly easy to review our debit card spending through online banking.

I do this on paper, dividing the page into categories:

• home — mortgage or rent, utilities, maintenance

• transportation — gas, car payments, maintenance

• food — groceries and dining out

• clothes

• family fun/outings/date night

• debts — student loans, credit cards

• other spending

Set…

Figure out your money goals

Now comes the math. Tally up those categories and figure out what you’ve been spending.

What are your goals here? Do you want to save for retirement? Pay off debt? Save for something specific? Buy a big ticket item?

The goals will need to be worked into the budget. Remember, we’re making a plan.

We’ll use the spending categories you tallied up and add a goal or two to the list.

Budget!

Let’s write it all down.

I like to do this on paper, too. And old school — with a pencil. This way, I can make changes as needed.

A digital spreadsheet also works, for those who love to work on the computer.

I’ve put some basic freebies together to help you get started.

The idea of a budget is to create a plan for spending your income. So the income is the number at the top of the budget and the bottom of the budget should be zero, because you’re planning where all your money goes.

Where do you start? Start with the non-negotiables. These are the home, transportation, food categories. Base your budget numbers here on what you’ve been spending.

Next look at those other categories: clothes, outings, debt payments, other spending, and those goals. Typically, these are the areas you have more flexibility.

Generally speaking, making minimum debt payments will not get you much traction on getting those debts paid off. I’ll get into detail about that elsewhere, but for now, if you’ve only been paying minimums see if you can add a little more.

Then look at those other areas once you have them written out with last months numbers. Does this leave money for your goals? If you need to find money for your goals, what can be reduced elsewhere?

This is my favorite part. I look at it like a game — where can I reduce numbers to add some elsewhere? Work on it until you get everything balanced.