Thursday, January 28, 2010

Budget Basics Refresher

1. Budgets work.  Call it a spending plan if it helps.  Call it fantasy spending.  Call it whatever psychologically makes sense to you, but do it.  Money won't master itself.  Besides, it's not really just the money you're trying to get control of, it's your life.  Budgets simply help your order that part of your world.
2. Budgets have to be written.  You can't 'do it in your head'.  If I had a dollar for every time someone told me how writing stuff down became a revelation, I'd... well... I'd have a lot more money to budget, that's for sure.
3. Establish your perimeter:  The following, in order, are the first things to budget.  Everything else follows
     a. God - Non negotiable.  He is first.
     b. Food - You gotta eat, and you know you're gonna eat.  You can't pay bills if you're too weak to work.
     c. Shelter - Duh!  Roof over your head, lights, heat, insurance, basic phone service, clothing (public nakedness is still against the law in most places).
     d. Transportation -  Umm..... make that, 'reliable' transportation.  You don't need car payments.  But you do need a way to get to work, school, church, etc.  Oh, and you need gasoline, oil, tires, that sort of thing.  Budget for them.  Plan ahead. 
4.  Use a good, simple budget template like the ones available at IOU NO MORE.  They will help you remember to cover all the basis.
5.  Have an emergency fund.  Set aside an emergency fund of at least $500 to $1000 for the unexpected.  If you are debt free, you should set aside at least 6 months of expenses (more on that in a couple weeks)
6.  Put as many bills as possible on automatic bill pay.  It really helps.  I still have trouble remembering to pay the ones I have to write checks to and mail in.  Auto pay and online pay are fantastic tools.
7.  Write down every transaction in a ledger.  Use a form or use the nice little registers that come with your checks.  But make sure you do it.  Check your account online at least twice a week.  I'm sure you have online access because you're reading this online now.
8.  If you're married, make sure you create your budget in cooperation with each other.  Being on the same page is mission critical to your finances as well as your relationship.
9.  Review your budget monthly.  Tweak it when necessary.  Do it in pencil, it makes changes easier and saves on paper.
10.  Have fun with it.  It's only money.