Category Archive: Budget

Get Out Of Debt – A Better Budget

I recently wrote about our debt reduction process – a simple one-page guide to getting out of debt.

Step 2 of our process was:

We created (and followed) a zero-based budget. We “spent” our paychecks, on paper, at the beginning of each month, so that we would know where our money was going to go.

I thought I would elaborate a bit on our budgeting process – and some tips that work for us.

We break our budget into three major categories: spending, saving and giving.

Within those categories, we try our best to estimate upcoming monthly expenses.  We save for annual expenses (such as insurance premiums) and quarterly expenses (such as our car insurance premiums).

The easiest way to save for a non-monthly bill?  Divide the amount due by the number of months until the due date – and that’s the amount to put into savings, each month.  When the bill comes due, you’ll have enough in savings to pay it, and you can avoid the “shock” of that non-monthly expense.

I am the math-nerd in our family, so I do most of the budget creation – buy my wife also plays a very important role.  She’s very practical – and often understands more about the day-to-day needs of our family.   So, after I create our first-draft, she looks it over, suggests changes, and then we finalize our budget.

After all of these years, we still use the good old envelope system to manage our cash.  It works for us for day-to-day transactions – but we also use our debit cards.

I have tried (and liked) various budgeting software programs, but the real truth is, our finances are so simple at this point, our budget is just a simple spreadsheet.

My wife and I both receive monthly paychecks – and I make some irregular income, throughout the month.  All irregular income is placed into our savings account so that it is available for unplanned-for expenses (or cool stuff that we just want to buy).

We make contributions pre-tax to our retirement plans, so we don’t technically “budget” for those funds.

I do my level best to pay all of my bills on the first day of the month.  We use online banking through our local bank to pay most of our bills.  I think we write 2 checks per month, for local services.

We try to stay on top of things – and to remember irregular expenses and possible category changes.  Recently, our oldest started driving (yikes!) and we had to change our allocations for gasoline, insurance, car repairs, car replacement, etc.

Our kids have their own money – from gifts and working around the house – and we have taught them to use this same system.  Our older two are brought in as we discuss the budget, and they often have great ideas for saving money and allocating our funds.

We include debt reduction (paying off our mortgage) under the spending category.  If we had many debts, we might create a fourth major category – debt reduction.

Creating a zero-based budget – and “spending” every dollar before the month begins – really helps us stay on track.  Please subscribe to No Credit Needed via daily email or rss – and follow me via Twitter and Facebook – for more content.  Blessings.


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Avoid These Budgeting Mistakes

My family and I have been living on a budget for nearly 10 years.  Over that time, we’ve made our share of mistakes – and we’ve adopted some valuable habits.  When making your budget, consider the following –

Do not wait until the last minute to make your budget.  Our budget begins on the first of each month, so we sit down and write ours out a week or more before then.  This gives us a chance to discuss the upcoming month – and it also gives us plenty of time to tweak the budget before the new month begins.

Do not use an unmanageable number of budget categories.  It’s easy to get too complex – or too basic – when creating a budget.  Use enough categories to “tell your money what to do”, but not so many that you are overwhelmed.

Do not use an unusable system.  If you have a spouse who is comfortable using budgeting software, rock on.  If not, stick with pen-and-paper.  Use a system that is accessible for all involved.  Which leads to the following –

Do not use a budgeting system that restricts total-family buy-in.  If the system doesn’t work for everyone, it doesn’t work for anyone.  When it comes to financial planning – I love to nerd-out.  My awesome wife? Not so much.  We want to work together to manage our finances, so our budgeting system has to be something that she will use and enjoy.

Do not forget annual expenses.  It’s easy, when making that first budget, to focus on next-month’s expenses.  Remember – there are taxes, fees, and insurance payments due on a non-monthly basis.  These must be factored in when creating a budget.  We use a savings account, make monthly “payments” into that savings account, and use those funds to pay for annual expenses.

Do not skip the emergency fund.  Budgets are awesome – but they are not perfect.  Unexpected expenses occur – which is why we focus on maintaining an emergency fund.

Do not keep your kids out of the loop.  We have three kids, ranging in ages from elementary school to high school.  We routinely include them (especially our older two) in discussions about money, financial planning, long term goals, and where we are headed as a family.  They like being included – and are developing skills which will be beneficial for them in their adult lives.

Do not overestimate the amount of sacrifices you are willing to make.  This is crucial.  Sure, we all like to think of ourselves as frugal, but creating a super-tight budget, based on unrealistic expectations, is a recipe for failure.  Obviously, we want to curb spending, but let us be true to ourselves.

Do not give up.  The reality is, there will be months when we simply do not stick to our planned budgets.  Life gets in the way, stuff happens, and it’s easy to feel discouraged.  Don’t!  Instead, regroup, focus, and move forward.  Take the lessons learned, and incorporate those into a new, improved budget!

Living on a budget has been a blessing for our family.  I hope that you have enjoyed this article.  If so, please use the social media buttons below to share it.  Thank you.  Blessings.

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Forgotten Budget Categories – Home Maintenance

When making a monthly budget, it is easy to forget certain budget categories.

One of the most often overlooked and underfunded categories is Home Maintenance.

It’s easy to understand.  None of us want to think about stuff breaking – especially in our home – so we tend to ignore this vital category.

Over the years, we have employed two different techniques for including Home Maintenance in our monthly budget.

1.  We simply lumped it into our baby Emergency Fund.  That’s kinda what the baby emergency fund is for, in a way, so that’s what we did.  When something broke, we stopped our accelerated debt reduction, fixed the broken item, and then continued with debt reduction.  This worked well for us, but wasn’t the perfect solution.

2240344525_bf3036b5992.  We created a separate Home Maintenance category in the Savings portion of our budget.  This worked very well for us – but it was a bit tricky, figuring out exactly how much to budget, each month, for an expense that may or may not be incurred.  At this point, we have enough data, from several years of budgeting, to have a pretty decent idea of what our monthly Home Maintenance costs might be.

Budgeting is, ever, an inexact art.  Over time, we have worked hard to minimize the surprise costs associated with household finances.  By taking the time to plan ahead – we have avoided the emergency-borrow-emergency-borrow cycle.

Side note – For those interested, here is a partial list of the Home Maintenance expenses we have had to deal with over the past 3+ years of home ownership:

We replaced two broken windows.

We repaired two pieces of siding.

We replaced the garbage disposal in the sink.

We repaired and reconfigured the outlet for our dryer line.

We replaced the blower mower on our HVAC unit.

As you can see, none of these are killer expenses, but all of them required a bit of money, and if unplanned for, could have been real headaches.

Image credit – austincameraguy

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