How do I create a good and FUNCTIONING budget??

[eirual]

We've planned our bills and purchases before, but things always come up (things that we really do need but forgot to account for in the budget) and throw us off. Without any end goals of what we plan to accomplish while budgeting, I think I get discouraged and all of life's (sometime uneccesary but helpful) purchases come to be thought of as a higher-priority than they need to be.

I've started reading Dave Ramsey's Total Money Makeover then left it behind at my parents' out of town. I want to create a budget that goes into detail and is alter-able as need be (I've never planned for power-steering fluid, snowpants, etc.) really, a WORKING budget.

I don't know what a good budget looks like. Is it based on monthly amounts, yearly amounts, or pay-cycle amounts? What do you do with the things that come up randomly or only once a year (like taxes, registration fees, license plate-renewals, etc.)Any advice or good places to start??

[smallmama]

The biggest AHA! moment I had (I think it was while reading the Total Money Makeover, so try to get that back when you can), is that the monthly budget can change. I have a template that I came up with on my own just by listing all our fixed expenses, and then general categories for variable expenses (groceries, clothing, gas for the car, household/cleaning, diapers, etc). Each of those expenses has a "base/normal" amount, but they can and do change. Every month I think about what we have coming up the next month and plan accordingly.

Last month was DS's birthday, so I priced what gifts I wanted to get him and put that amount in the "gift" category, and also added more money than usual to the groceries category for the party food. Because of that, I had to cut from other places like clothing and eating out. This month our car registration is due, so I put a line item in for that and am reducing the amount in several other categories (groceries, entertainment, etc) to make up for it. Next month, I'll buy most of DS's fall/winter wardrobe, so the clothing budget will be higher than usual that month, but we have no birthdays so the gift budget will be low.

If it were a really huge expense that I knew was coming and couldn't make up for in one month, like Christmas, I would start a sinking fund for it several months in advance and put some in it each month.

I do our budget monthly, which works since that is also DH's pay schedule. Try it each way and see which makes more sense to you.

[eirual]

Thank you for keeping that so simple and straight forward! I think I just need to keep trying and not trying to sub-category things too much until I find a format that works for us.

Maybe I'll create a list of all of our fixed expenses with blanks for the variables each month. I am sooo ready for a change! (and the reason it's at my mom's is beacause I brought the book camping with us- I can't put it down! It got shoved in her bag last-minute, then packed away....I miss it terribly and might go to the library to check out another copy while I'm feeling so inspired and motivated)

[avendesora]

I've figured out all my fixed costs and our fixed income, and figured out what was left. I have x dollars that I can spend on miscellaneous items per week. Because you're right, there are always surprises. I also budget myself x dollars for food too, and I figure that by the week as well. I tried doing it by the month, but I always ran out before the month was over. Simple.

Aven

[lmonter]

Here's a copy of our monthly budget, from about a year ago. I've since morphed a few things together so there's not as many little subcategories and deleted credit cards from the "debts" part as we paid them off and such, but still. We'd started off with a secondary checking account for those regular-but-irregular things like car insurance, licensing, car repair (since, as I'm sure you know, is quite sporadic, but you will need money for it at some point).

Then we got better with our spending (well, or more accurately, not spending), and we switched banks last year, and just left it all in one account. So we only pay our life insurance premiums once a year in January (right after Christmas to boot!) - but we make sure we set aside the $47/mo from our monthly budget for that and leave it in the account for when we need it. Same deal with the car repair/licensing and such. That kind of thing.


ETA: I always mess around with the budget in pencil. Say we need to spend an unexpected $300 on new snow boots, snow bibs and then an unexpected doctor visit - I'll go through, see how much we may have spent already that month, and tweak the grocery budget or household budget (which pretty much everything non-food like tissues, TP, canning jars, towels, etc. goes in) with my eraser and calculator. But that's my preference - some folks do their stuff with Excel on the computer or whatever. I like my pencil and eraser.

[eirual]

Thanks

So I made one up, and have already modified it multiple times, but I can see how it will work once I start working with it.

Question- do you project for the month (i.e. make a plan), modify as need be throughout the month, then reflect at the end of the month? Do you keep receipts for the month, reflect on the budget then pitch or stash?

[eirual]

How often do you collaborate with your spouse about the budget? Weekly? Monthly? As things arise?

[sunnysandiegan]

I have a budget loosely planned for the year, broken down by month, that I do in Quicken because we already have it and use it.

I take the averages from the previous year and adjust up or down based on what I know at the time for the annual figure for each category (for the upcoming year). Then, I break it out by month specifically and alter the specific line items that need tweaking. Like, car registration is an average of say $15 per month, but it is paid in January all at once. I put the full dollar amount in January and zero out the other months. That means, like another person wrote, I have to make up for the rest of the month somewhere. It also means I have a bit extra in the rest of the months. I spread out our expenses like these, so that the actual payment is made in different months and the monthly "average" is sort of held in place every month. A different company gets paid the actual money when it is their turn to get paid. I don't know if that makes sense in writing... I tend to explain things better in person.....

Anyway, to answer your newest questions, I print a few reports monthly and share with DH (and DD) over dinner. If something comes up sooner, I share it as necessary. I generally keep track of our "hot" categories (those which tend to go over or get out of control easily) every single week and give DH a quick verbal update that night over dinner. This has been simply magical in controlling those categories and keeping them within budget.

I highly recommend starting off with broad categories and only increasing the detail once you have established a working routine for handling finances. Starting off detailed backfires for most real people I know. I have a degree in finance and have helped MANY friends and small businesses get out of debt and/or set up a workable plan. When I wasn't doing the actual finances for them, people would get overwhelmed really fast with more than a dozen line items (or thereabouts) and quit tracking things and then quit paying the amounts we discussed, etc. When I was paid to do the finances for them, I was willing to keep track of more details and show them the info in simple reports to pinpoint the issues in black & white. Unless they were willing to actually change their ways, however, it didn't matter who was doing the work or how much detail was tracked.

[lmonter]

Originally Posted by eirual

How often do you collaborate with your spouse about the budget? Weekly? Monthly? As things arise?

Used to be once a month or so until we hit our groove, then just every once in a while - like every two months or so. But that was after like two years. If something comes up, then yup, we discuss it. And we're also a family that discusses most purchases. I know it seems weird that we consult each other about a $20 item (besides things like groceries) just to see whether we really do need it or can figure out something else, but it's just the way we are. Sometimes I just need hubby to talk me down from the ledge of buying a goofy toy from TJMaxx that the kids just don't need or I need to talk him down from an okay deal on an LCD TV at Costco or something.

Originally Posted by eirual

Question- do you project for the month (i.e. make a plan), modify as need be throughout the month, then reflect at the end of the month? Do you keep receipts for the month, reflect on the budget then pitch or stash?

All of the above. Project for the month as need be - especially if it was a 3-paycheck month or when hubby used to get end-of-the-year bonuses we'd reconfigure the budget and plan what to do with the "extra" money so we didn't squander it away. Which, trust me, we did before the budgeting thing.
Or like the day hubby got laid off earlier this summer? After the kids were in bed you bet your behind we were whipping out the budget and checkbook to check on things and getting our game plan on.
If we do go under for some categories for things though, I just was lazy and called it a wash and left it in the checking account as more savings/buffer. But we don't live paycheck to paycheck anymore figuring out what bills to juggle in order to pay the car insurance every six months - we have our nice buffer of modest savings and such. Not as much as some folks, but enough that getting laid off has been more of an annoyance rather than meltdown time.

[eirual]

I get paid monthly. I am NOT going to use my credit card this month (I usually use it for expenses, then pay it off when I get paid) but things became a bit too fluid a couple of months ago and I've been paying for it ever since (or not paying for it really).

I have $385 to get me through the month (after bills are paid) this usually drifts away on 'necessities', but I'm going to get it in cash and put it to work, hopefully. So far I can think that I'll need $200 for gas. Which as of now leaves $185 free.

When you do jars or envelopes and live off of cash, is there a system you've found works best for you? I've tried it before and it still seems to flutter away (maybe 'cause it was too divided- clothing, gifts, some free spending for me- if nothing came up in that category it was easy to take from the other one, and before you know it it just doesn't matter and there's more month left at the end of the money.

I think having this PLAN that's thought out and has an end goal will help and not make things like they were previously. I'm just curious if one way might be better from the next in your experiences. I think I need to get into a routine a bit more too- like filling up with gas every Wednesday so 'empty' doesn't come up during a rushed time and I don't have $$ on me at my every convenience.

Okay, sorry, my mind's going a mile a minute.

[mnnice]

We talk about the budget usually once per month and talk about any anticipated expenses. The total budget amount is not the same every month. Months with vacations/travel and major holidays are more. Febuary is always less cause it's short and it cold hear so we either stay in or go cross country skiing.

DH and I have had very detail conversations about what is an envelope expense or not (traditionally it has been all food, fuel, clothing, entertainment, gifts,oil changes. It has not included car tags or more major repairs or maintaince, or our satalite tv). The monthly envelope is not itself divided up into categories. We withdraw cash once per month and put it in a secure place in the house. DH and I put the cash in our wallets usually in $100 increments and we are both responsilbe to keep track of what it left and how our spending is going.

I have no idea why the maple leaf icon is up (or how to get rid of it). I am not Canadian (although DH used to work for UA Canadian company). Maybe I was just saying hi to my neighbors on the otherside of Lake Superior.

[AngelBee]

:

[eirual]

http://www.mediafire.com/?sharekey=2...bfb25af05b86c4

Well, there's what I made up. That's a copy for sharing, so it's not filled in as it is for my working copy. I think I like it, go figure my printer went on the fritz after printing my rough!

I like that it's monthly, accounts for fluxuating and extra ins and outs.

Things italicized are things that DH and I can cut to meet our 12 mo goal of getting out of debt with 3 mos of living expenses saved (and we'll takle the other 3 after we get that far).