Please Budget!

A recent discussion with a fellow coworker and the fact that my husband started a new job has inspired me to share the following revelation with you.

For those that know me, it's not a big secret that I quit my first "real" job after college. I still believe it was the best choice. I was VERY unhappy and that is no way to go through life.  The biggest negative was the impact on our income. We hadn't even been married 6 months.

Okay, there I go again, providing useless background information and details. Quitting your job being a good idea is not the revelation I would like to share with you. (I'm NOT saying quitting your job is a good idea BTW.)

The revelation is that NOTHING can prepare you for entering adulthood.

Our parents (or other, wise "older" adults) offered advice mostly in a joking way (and to give them credit sometimes in a not-so-joking way) that "one day we're going to know what it's like to be an adult". Could they maybe have elaborated in such a way to let us in, just a little bit, on the fact that being an adult means paying all of the bills (on time!) and still having enough money left over for other necessities such as groceries and gas. IF-and only IF-there is any left can you indulge in the non-necessities such as iPads, Coach purses, and traveling. However, most do not care about the IF, they use credit cards to take away the "if" and make it a "no matter what". But that's a completely different rant. (There I go again!)

I'm here to share with you the importance of budgeting. Budgeting has allowed my husband and I to keep track of where our money is going. It has allowed us pinpoint our weaknesses in our spending habits and to "trim" our budget wherever we can. It makes us accountable for spending money. I love budgeting. I've changed our budget many times since I began keeping track of our finances just a little over a year ago and I am quite happy with it! You, too, can create your own budget in just a few simple steps!

1. Make two columns on a piece of paper. Label one "bills" and the other "expenses". These are broad titles. The bills column should include mortgage/rent, utilities, credit card payments, cell phone, college loan payments, etc. DON'T FORGET to budget a monthly amount to be set aside for your insurance bill! The expenses column should include groceries, transportation costs (gas, train pass, parking, etc.), monthly medication costs, etc. I also like to think about the month ahead and add any purchases that I know we will be making such as upcoming birthdays, oil changes, or the dreaded license plate renewal cost. Oh! I also include a MINIMUM amount we'd like to put into savings every month. Add it all up and write down the total.

Note: In order to determine what your monthly grocery and transportation costs are, you need to save EVERY receipt for an entire month. Add them up at the end of the month (I suggest keeping a log to save time.) and place them in their respective categories to get the average amount that you spend on these necessities every month. I'm not saying that it won't fluctuate but it will give you a pretty good idea of how much money you need to set aside.

2. Figure out your monthly take home pay (after taxes, insurance, and any retirement contributions). For some, this is unchanging. But for others, including myself, it changes. I estimate (on the low end) what I will make each week and tweak it, if need be. This allows me to see how much money we have coming in for the month.

3. The next thing you need to do is subtract ALL of your expenses (bills and necessities) from your total take home pay amount. The amount left over I call "extra". This extra can be used towards what you like. For example, my husband and I like to travel so I put away some of that extra every month into a vacation fund. If we have a particularly large amount of extra, I like to put some more money into savings or use it to pay on any debt. Use your extra however you'd like but remember that as a rule of thumb your savings/emergency fund should be working its way toward 6 months of  your household bills and expenses!

The most important thing to remind yourself of as you're making your budget is to BE REALISTIC. Be honest with yourself. Don't disclude any payments because thinking about them stresses you out. That's why you are creating this budget-to become financially free.