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Discussion Starter · #1 ·
I wish I had learned how to make a budget in Home Ec instead of learning to make pillows and an awful soup that made everyone sick on the day of soccer tryouts...

So, where did you start with making a household budget for yourselves and your families? Can anyone recommend a book or plan for doing this? Our efforts to just "spend less" are too vague and unsuccessful.

Background: we want to get rid of medical debt and DH's cc debt (around $15,000), and eventually start adding to a savings, especially for DS's college (he's almost a year), and maybe an IRA for me. An incentive is that we have relatively low rent right now and would like to move to another city in the (near?) future. We're just starting to think about what to cut out, how to curb our spending, where to cut corners, etc.

I graetly appreciate any guidance. No suggestion is too obvious! TIA.
 

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These things were helpful for me when I was trying to get the budget written and followed:

1. Mary Hunt and Suze Orman books, I really liked their personal stories and their approaches. I like the fact that they encourage 10% into savings, 10% to charity and living on 80% of your take home pay. Making out those checks to help out a family in Guatemala and a homeless shelter each month really makes me appreciate all that I do have and innoculates me from the "poor mes".

2. I used computer software (MS Money, Quicken, etc) to track assets and budgets. When I would update it on Sunday nights with information, it helped remind me to stay on track. Also, it can help you work toward a larger goal like paying off debt, college funds, and retirement.

3. Have an accountability partner. My aunt and I lived a few states away from each other but would occaisionally e-mail each other for support and encouragement.

4. Use online banking for all your regular bills. It helped me to avoid late fees. You can also set up an automatic withdrawal from your checking account to your savings account each month to help build a small nest egg for those rainy days and avoid more credit card debt.

5. Use cash for non-bill expenses. We take out about $700 each month in cash for lunches, groceries, gas, car repair, dining out, home improvements, charity, etc. Each category has an envelope. Once the money is gone its gone and we just make do until the next pay period.
 

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Get a notebook and a bill holder. This is the most important thing you need to have to be organized.

Here's what I do. I write down all my bills per month like:
July----service charge, union dues

Electric- $160
Gas- $40
Water- $15
Jeep Note- $....

Outstanding bills such as back loans, etc...goes on the bottom as they're "extra" yet need to be paid bit by bit. You need to decide how much of each you're willing to pay each month and have some sort of schedule going. (I'd put how much I'm willing to pay a month and then the remaining due in brackets on the side of it.)

I then total up how much money this is, and divide it by 4 because my husband gets paid weekly. This gives me an average of how much I absolutely need each week for bills. If you want to start paying off stuff weekly, you add that to your list... You then figure out how much more you'd need for groceries and count that in.

Whatever money you have left over....you learn to make due with that...and maybe save some of that if you make enough....

Explaining further:
Our average bills a week are $400... I try to add $75 to 100 for groceries. Whatever's left...we use for gas, cigs, etc. If it's tighter that week, we don't do as much things outside of the house, lol. If he made more that week, we'd do a little more fun stuff. And if there was money left by next payday, we'd either save it or use it on a bill we want to pay extra on.

This has worked very well for me for years... Hopefully you can work with it too...

Many Blessings,
April
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I like this guide to get you started.

http://crown.org/Tools/budgetguide.asp

It is from Crown ministries, which is Christian based, FYI. But, it really helps you start out with some "average" percentages. I think it gives you an idea.

Of course, none of us are perfect percentages. With those percentages in mind, what I have done is sit down with our income, our non-negotiables (mortgage, our donation to church, taxes, insurance, utilties, debt payments, car insurance, car tags), then subtract out. I'm left with a number to play with that includes all of our non-fixed costs (food, clothing, entertainment, Christmas, vacation, haircuts, doctor copays, gas, cash withdrawls, vet bills, etc) I look at our history, then put those numbers into the budget.

If it doesn't work, I know that some places need to be cut. So, I look at what can be cut. Have we spent way too much on vacation and we need to cut back and only camp this year? Do we need to eat out less? Take out less money for cash every week? Do we need to reconsider our monthly prescriptions and consider asking the doc for a generic? Nothing is sacred in this process. I crunch until I find numbers that seem to work for us.

Then, we live with the budget for a month. What did I overbudget on? Underbudget? What can change? So, I change it...

our budgets tend to last 1-2 years before they need tweaking.
 

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I second the Suze Ormon recomendation. I just recently read "The Courage To Be Rich' and loved it. Very helpful. Deals with our attitudes about money and changing the mindset as well as teh nuts and bolts of debt reduction, investing, etc..

Dh and I find things go much better when we have a set goal. Very specific ones. Right now our big ones are paying off the car in less than a year(we are making doublepayments every month. Because of the way the financing works, this means that every month the required payment is lower, we pay the same amount, and every month an even higher percentage of our money is paying off principle) and we have a goal in mind for our savings account, an amount we decided we want in order for us to be comfortable about any minor emergencies or short-term money problems we could survive a fe wmonths on that savings. This is working MUCH better than the old'we should save money, not spend so much' 'yeah, totally' 'wanna go out to eat?' 'ok'.


There are other things we are working toward as part of the bigger picture but these are the most immediate.
 

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My approach may be a bit different than what I'm reading here, but I think it's tried and true.

I think the first thing you need to do is spend one month recording every single penny you spend. Be faithful about this, as you'd be surprised where small amounts go and how quickly they add up. Everyone who spends money in the family needs to do this. And you need to separate them out... for example if you eat out once a week and 3 of you get a soda, and you go for ice cream once a week... that can add up to about $50/month right there. Don't just record "dining out" because one place you could tweak your budget is to drink only water when dining out, for example, or eat only store-bought ice cream. Try to get on a yearly budget payment schedule for utilities where you pay the same every month, but they tweak it once a year.

Once you know your outgoing money, you can find all the places you can cut corners to provide the extra cash to save. Write down the numbers and stick to them. Above all, once you have that budget, PAY YOURSELF FIRST on payday. By that, I mean, the FIRST thing you do is take out the amount you want to save each paycheck and put it in the account. That is the net you work from instead of paying yourself a savings amount AFTER you've paid the bills. So many times people say they'll save, then when it's the end of the month, it seems so easy to "start saving next month because, oh, those pumps are just adorable and don't they just accentuate my calf muscles!!"
Treat the savings as if it doesn't even exist. You can even make the account such that it requires both your and your husband's signature to get any money out... that way you can't get it impulsively and you have someone to be accountable to.

About paying down debt and saving. After paying down debt, the first savings you should have is 3 -6 months salary in cash. By cash, I don't mean literal paper money, I mean an account that you can access immediately (money market mutual fund or savings account... although I don't recommend savings accounts because their yields are so low and most MM mutual funds have check writing capability - check out Fidelity and Vanguard's MM Mutual funds... they even have tax-free accounts that lower your tax liability if you're worried about that). If you have equity in your home, I would worry less about this emergency stash as you could always borrow against the equity, however, you should slowly build up this stash even if you have healthy equity because the HELOC rates are rising with no immediate end in sight.

After you have that emergency stash, if you have to choose between saving for retirement and saving for college, you should save for retirement. There are hundreds of different and cheap ways to finance college if needed, but you can't finance your retirement. A Roth IRA has what I consider two major advantages over a traditional IRA. It is not taxable income when withdrawn in retirement and it is a wonderful inheritance vehicle as you can pass it on tax-free to your child(ren) upon your death if over the years your retirement savings gets up there near the estate tax level.

Good luck with the debt pay-off and budget. Sorry for getting long-winded on the suggestions, but I'm the one that deals with our financial planner, so I'm interested in this stuff. Also we are debt-free - it's so liberating I'd love everyone to be debt-free, too!!


ETA: Also, ask about getting a decrease on CC interest. Or take advantage of a 0% interest introductory rate with balance transfer on a new card (BUT BE VERY CAREFUL OF THE RATE AFTER THE INTRODUCTION!!)
 

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I do a Zero-Based Budget. I prioritize all of my expenses and what they will be. I cut anywhere I can (and oh how I've cut!) and then the surplus gets put into whatever TTMO step I am working (currently $1000 in ER fund).
 

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velochic
~Thank you for posting to this thread. While some of it is totally not within our reach (we don't have credit cards nor manage to save 3-6 months of income), I did decide to look into the money market mutual fund for future saving. Hubby's been unemployed for almost two months and it's been rather rough with no money to pay more than the utilities. He and I were saying last night we're going to have to save something in each check somehow....so that we'd have the cushion we need if this should happen again (he's into steel construction).
~So, we're looking to create solid improvements in how we work our money. I wondered if having a credit card wouldn't have helped us out to pay the bills while this all was going on. Then I wondered about having another bill. We've not ever had a credit card.
~For the record, I know I posted how our budget works previously. It does work when money comes in regularly, lol. I simply needed my own advice about the savings part.

Many Blessings,
April
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April:

Velochic has given you a very wise path to begin on.
I would add on the keeping track of expenses, invariably you will forget items, and then add them later, or two weeks later think ..."oh I forgot this expense"
Get a little notebook that can fit in your wallet or pocket and carry it every where.
I also would recommend doing this for 3 -6 months, since this is the size of rainy day kitty that you would ideally build up, so you would ideally like to know what your expenditures are over a period of 3-6 mo. In one month, you may not have a big ticket item (like a car repair). But to begin with 1 month is good, since tracking for 6 mo sounds like a daunting task.

I think an even greater benefit to this exercise is, not only to end up with a final sum, but the actual registering and cognizance you develop from tracking your every expense. When I first did this, I would think..Phooey, I don't want to write down that I spent $3 for a pastry! So I would skip the pastry. Not that the goal is to live an aesthetic life, but that you become more aware of actually SPENDING money.

I would also recommend the following books Your Money or Your Life
http://www.amazon.com/gp/product/014...20049?n=283155
and the Millionaire Next Door.
http://www.amazon.com/gp/product/067...e=UTF8&s=books
Simple fast reads that may provide some new perspective on spending/saving. And most probably your library has them!
This is my favorite quick read finance book (and a fun read):
The Only Investment Guide You'll Ever Need (Paperback)
by Andrew Tobias
http://www.amazon.com/gp/product/015...e=UTF8&s=books
 

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p.s
~Thank you for your added words. I have looked over the books at the amazon links you gave me and wrote the titles down. I will look in my local libraries next time I'm out that way and see what they have.
~I understand what you're saying about writing down every expense. I'm honestly not sure I would do that; however, I am fairly concious of our general money usage and where it all goes. I'm more interested in making a concious effort to start saving every week.

Many Blessings,
April
intuitive medium
 

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Quote:

Originally Posted by AprilDaisy
velochic
~Thank you for posting to this thread. While some of it is totally not within our reach (we don't have credit cards nor manage to save 3-6 months of income), I did decide to look into the money market mutual fund for future saving. Hubby's been unemployed for almost two months and it's been rather rough with no money to pay more than the utilities. He and I were saying last night we're going to have to save something in each check somehow....so that we'd have the cushion we need if this should happen again (he's into steel construction).
~So, we're looking to create solid improvements in how we work our money. I wondered if having a credit card wouldn't have helped us out to pay the bills while this all was going on. Then I wondered about having another bill. We've not ever had a credit card.
~For the record, I know I posted how our budget works previously. It does work when money comes in regularly, lol. I simply needed my own advice about the savings part.

Many Blessings,
April
intuitive medium
Actually, I was responding to the OP about budgeting.
I wasn't really thinking of your situation, but Pepe's, whose main concern was paying down their credit card debt and being able to save for their son's college.

But I hope maybe some of what I wrote helped you too!! Like Pepe, some people aren't even sure where to start.
And I hope you find a money market mutual fund you like! They are so flexible, you can replace your checking with them, sometimes.
 

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Discussion Starter · #13 ·
Thanks so much to everyone who responded/commented. I already feel better--like with these strategies and ideas we can learn to manage things. Before it was a worry keeping me awake at night, but now it feels like an important project.

Thank you!
 

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Books by Dave Ramsey.


I find them much easier to digest then Suzi Orman's stuff. Suzi talks alot about credit card debt....which we really do not have. However, we are in debt due to owning a business and having to take out personal loans.

Also, Oprah did a series called Debt Diet. If you go to www.oprah.com you can get alot of info and tips from on there.

On thing that helped me put things into perspective was the percentage guidelines they gave for spending.

This is the percentage AFTER taxes that should be allocated to:

Housing 35% (includes rent/morgage, taxes, insurance, etc.)
Transportation 15% (payment, taxes, repairs, oil change, bus fair, train, parking, etc)
Other 25% (money you live on...groceries, clothes, entertainment, tolietries, etc)
Debt 15% (paying off debt)
Savings 10% (even if you are in debt so that you have a safety net)

HTH
 

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Quote:

Originally Posted by AngelBee
Books by Dave Ramsey.



I agree, I love me some Dave. We're on step one of TTMO and it's full-proof if you work it, because it's common sense. Simple, simple common sense. I love it.
 

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Ok I bought the TMMO this evening. Can't wait to dive in and work out a livable budget!
 
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