Creating a Budget

All right, now that you know where you stand financially, it’s time to develop your budget. I created a Microsoft spreadsheet and listed my paycheck dates for the month. I entered my net (take-home) pay above each check date. Then one by one I listed all of my bills in order of importance. My bills have changed over time but here is a peek at what my budget looks like today:

Net Pay                       0.00           0.00       0.00        0.00
Pay Date                     4/13            4/27        5/11       5/25
Spending $
Gas
House Bills
Dog Food
Student loan (28th)
Health Ins (9th)
Walgreens
Car Ins (June/Dec)
Phone
Checking Fee (1st)
Couch (6th)
VISA
Vacation
Total Bills                  0.00           0.00          0.00          0.00

Difference                  0.00           0.00          0.00          0.00


As you can maybe see (I can't figure out how to make this site post cells from Excel), I created formulas that calculate the total amount of bills per paycheck and the difference between that and my pay. This way I can easily make adjustments and the formulas will do the calculations for me. I always want that ending balance to be zero then I know that every penny I bring home is accounted for. I keep a zero balance in my checking account. Every time I get paid I fill out my checkbook register with everything that’s going to be paid from that paycheck. I check things off as they clear my account so I always know what’s still outstanding.

I have my budget planned for the entire year so there aren’t any surprises. I’m a planner by nature. I have my budget saved onto a jump drive and carry it with me everywhere I go.

I allow myself $80 per week in spending money. Sometime I bump that up to $90 or $100 depending on what I have planned during a two-week pay period. This spending money goes toward any expense that hasn’t already been budgeted for. Usually I spend it on going out to eat, weekend entertainment, trips to the pet store, Walmart runs, etc. Basically anything “fun” I do during the week has to fit into this $80-$100 price range. You’d be surprised at how quickly it runs out.

My rule of thumb is to pay off bills in order of due date while remaining current on everything else. For example, if I had $39.62 remaining after paying the current balance due on my bills for one paycheck, that $39.62 went to my Visa. Or Art Van. Or whatever bill was due (in full) next. I paid off my medical bills first followed by home improvement loans from my parents, furniture purchases, my auto loan and then credit cards.

It’s a slow process, it really is. But I celebrated each “victory” because I had worked hard to earn it and that truly is something to be proud of. I’m close to paying off the debt I originally set out to get rid of. This should happen on 8/3/12. It could technically happen sooner but I have two vacations planned that I have budgeted for in the meantime.

I didn’t include my student loan or my half of the home mortgage when I originally listed my debts. I think at the time those goals seemed totally unattainable. Now I’m realizing they’re really not. I owe close to $36,000 in student loans. I could probably pay that off by 2018. I haven’t decided if it would be wiser to focus on paying that or the mortgage down. We bought our house over seven years ago before the housing market got so bad. We’ll probably never be able to list it for what we paid so I think it might be smarter to shift the focus to that next.