Budgeting Basics

Well I'll go over some basic budgeting principles in this post. First when we budget we want to have an idea of how much money we have coming in each month, an easy way to get started on this is to check bank statements or go directly to pay stubs. Depending on your employment pay may vary month to month so it is a good idea to check a few months worth of income and come up with an average you are comfortable with. The average is going to be what you are working with in a month. You then take your "needs" expenses out of this income being Rent, Food, etc. also debt payments fall into this category because they need to be paid no matter what. For more on these "needs" expenses check the needs vs wants posts.

So of our income we are going to reduce it hopefully to a positive number. Some challenges occur in the first subtracting step with items like food, because we don't spend the exact same every month depending on sales or appetites or whatever. I like to have an average idea on the food or other varying expenses by checking a few months of spending. This may be difficult if you don't have a record of spending, sometimes bank statements may be helpful for this or credit card statements if you use credit cards and pay them off. I personally like keeping a record using a computer program Quicken that came with my laptop. I will discuss record keeping in a future post. With records of our expenses we should be able to estimate food expense or if car travel is an important part of our lives we could also estimate gas expenses.

I know starting a budget can be hard and the record keeping is a lot of the difficulty so I would suggest getting started with that as soon as possible. Even without it though you should estimate as best you can your varying expenses and subtract them from your income. Now comes a difficult part the "wants" budgeting. I have never been fond of this because it is hard to budget whims or fancies, but there was an involved method I learned once that was an enjoyable way to do this part. I will elaborate in my next post.