Got Budget? (Part 2 of 2)
Funny how things happen in my life that sometimes mirror my blog. It’s always fun to share personal stories, but even better when they complement my current topic. This week I was working at a client’s home and when I got into my car to leave, I discovered that the battery was dead.
This is a perfect example of those unexpected, but not surprising expenses that can tip the balance of our carefully crafted monthly budget. Thankfully I had enough money in my Bill Escrow account to cover the new car battery.
Last month we talked about preparing a Bill Escrow for your family. This account encourages you to save money each month for irregular or unexpected bills. You should now have a dollar amount in your budget for this purpose. For more information on what a Bill Escrow is and how to set one up, read Got Budget? Part 1 of 2 in my Everything Organized! blog for October.
The next step is creating a simple budget that will help you organize your money each and every month, and making it something you will be able to maintain. There are many tools available at either no cost or very low cost to make the process easier. Below are a few online tools that will allow you to organize a budget and track expenses.
Buxfer (www.buxfer.com) allows users to track expenses through manual input or by importing payment statements from bank accounts, Quicken, or Microsoft Money. Buxfer offers a free basic account, but there are two other options available. Buxfer Plus costs $1.79/month and Buxfer Pro is $2.79/month.
BudgetPulse (www.budgetpulse.com) is a free personal finance software that is the perfect solution for managing your finances. You can organize your cash flow, expenses and bank accounts in one place. It has easy to understand charts and graphs which enable you to visualize how you are spending your money month-to-month.
Mint (www.mint.com) offers a great money management tool, and it is completely free. Mint’s business model is to bring in users with a quality product, analyze their spending, saving, and other financial habits, and offer suggestions for improvements. Mint shows users how much money they could save or earn by using a credit card with a lower interest rate, earning higher interest from a bank account, buying a less expensive cable service, and other ideas.
If none of these three online tools interest you, you can create a simple budget yourself using an Excel spreadsheet. Excel allows you to create columns, color code, and use formulas to add up columns. If you have Excel on your computer, follow along with me below to create a simple budget.
For simplicity purposes, let’s assume your paydays are the 15th and the end of each month. Create two columns on your spreadsheet and label the first column 15th and the second column 31st. Under each date, enter the bills or expenses that will be paid from each paycheck. For example, car payment may come out of the 15th but groceries may be split over both paydays. Don’t forget to include a line item for your Bill Escrow (see last month’s blog post).
After you have listed all your bills and expenses, color code bills that you are trying to pay off over time in red and always place the remaining balance to the right of the payment figure. For example: Discover Card $100 ($2000). This allows you to quickly see your debt and what the balance is after your monthly payment.
Next use the “sum” formula on Excel to add up each column separately, and then total the two columns to see your monthly expenditure. If you bring home (not gross, but take home) $3000 a payday then the sum of the two columns should not go above $6000. Once you have the calculation, you can make adjustments to some expenses to match your income. It would be a good idea to use excess income to pay off debt and tweak the grocery number on the month you are going on vacation. Each month there will be adjustments and depending on what you include in your Escrow Bill sum, you may have to add line items for a birthday or anniversary.
When payday arrives and after each bill on your budget is paid, highlight it in a particular color, thus allowing you to quickly see what has been paid. Don’t forget to transfer monies into your checking account for bills that you had budgeted for in your Bill Escrow account. For example, if your car tags came in the mail on your October 15th payday, ideally you would have included that expense in your Bill Escrow total since this is not a monthly bill. A Bill Escrow account is really a forced savings for irregular bills that arrive at various times of the year.
I would suggest keeping a budget like this for a year at a time and update it often. Treat it as a living, breathing, entity of your finances. If something changes in your life such as a new baby or even something as simple as going to average billing on an electric bill, your budget will need to be adjusted. This type of budget does not track your expenses penny for penny, but it does give you a short and long term plan for where your money will be spent and helps you save for future investments in large ticket items or surprise expenses.
Organizing your finances certainly takes an investment in time, but I can tell you from my own personal experience and for those clients we have helped, setting up a simple budget is well worth the time.
Lorraine Brock is a professional organizer, family coach, speaker, and founder and owner of Get Organized!. Get Organized! is a professional organizing company in the Dallas, Texas area. Get Organized! specializes in organizing and de-cluttering homes as well as implementing systems in the home for better family management.
A popular media guest, Lorraine has appeared on Dallas’ two top morning television shows: Good Morning Texas and Good Day Fox, and has been featured on various radio outlets. She has been hallmarked in many local, regional, and national print and online magazines, such as the Dallas Morning News, The North Texas Kids Magazine, SheKnows.com, and Daily Candy Kids. To get more information about Lorraine, visit www.GetOrganized.ws.