Saving money is exciting but now you need to know how to manage your money and put it toward a goal of some type. To do this it is good to put together a budget.
Some want to break out in hives when they hear the “B” word.
So much so that some bloggers even give the “B” word another name, such as Cash Flow Project.
No matter the name it all begins and ends the same.
You started meal planning for a reason. It could be because you just wanted to make better choices for your family or it could be that you want to have extra money to put towards something.
Like to pay off debt or to go on a vacation or fix up your home.
Whatever the reason you want to know the best way to go about this whole money managing game.
A budget is necessary if you want to create spending habits to save money to get you closer to your goals.
But a budget doesn’t mean the end of the world or overwhelm-nation needs to kick in.
Here you have everything you need to create your budget and even understand how you did it.
CHOOSE YOUR METHOD TO MANAGE YOUR MONEY
Creating your budget is only the beginning.
Tracking in your budget is where many fail.
Let’s prevent you from failing.
So think about the tracking method that will be the easiest and most convenient for you and works best with your personality.
WITH PEN AND PAPER
When you are just beginning your budget you may want to use the simplest method so you don’t have to think too much about it.
This would be the ole pen and paper method.
There is something said about physically writing your numbers down on paper and doing manual calculations.
This physical act could make you more aware of how you spend your money.
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USING APPS ON YOUR PHONE
Budgeting apps can be used to automatically pull in your information from your financial institutions, such as your bank, credit card services, and investments;
Or you can go the manual input route.
One of the most known apps for automation is Mint. The Mint makers are the one and the same as those who created TurboTax and Quicken.
Intuit has made many features available through Mint so that it provides you automation for budgeting, bill pay, and you receive alerts of charged fees or activity that doesn’t fit your normal spending habits.
Although Mint is secure you may be a little weary of the whole automation scene. I was one of those weary folks that had a hard time with automation in the beginning.
If this is the case there are also apps that you can enter your stuff manually.
One app who actually prides themselves in simplicity is Fudget.
With Fudget, you will enter your income and expenses. Period.
There ain’t a bunch of graphs, charts, or categories to get in your way.
Another app that is increasing in popularity is Dave Ramsey’s EveryDollar.
EveryDollar has a free manual option or if you find that you really like it and become comfortable with automation you can purchase the EveryDollar Plus.
With EveryDollar the idea is to plan for every single dollar you earn. So, as you enter your budgeting numbers the app will let you know if you have planned all your earnings.
WITH AN EXCEL SPREADSHEET
I am an Excel fanatic. I love spreadsheets!
If you don’t know anything about using spreadsheets this may not be the way for you.
I am actually in the process of creating a pretty cool system by spreadsheet but for right now I simply list all my expenses down in the first column and then the next thirty-six columns are broken into three columns per month. For each month the columns are for payments, income received, and then an accumulating total column.
Sounds pretty complicated now that I’ve written it out but really once it is setup then all you have to do is enter numbers and everything else calculates for you.
STEP-BY-STEP BLUEPRINT TO MANAGE YOUR MONEY
First you need to know how much money you have coming into the budget.
STEP 1. DETERMINE YOUR INCOME:
This will be disposable dollars available for you to spend.
How much net income do you have coming in?
Traditional paychecks will already include deductions such as taxes, 401k, insurance, etc so that your net dollars are what you receive.
In situations where you have your own business, such as a contractor, then you will include your deductions in your budget. You will want to be sure you are saving for necessary expenses such as taxes, social security, and medicare which you will face when it is tax time.
Figuring out your income will be super easy for those who are a salaried employee or fixed income. Just simply note your net amount.
If you are paid hourly, by the job, commission, or any other type of pay then it can be difficult to know what you will receive. In these cases note the least typical amount that you expect to be paid. Some may would argue to average; however, doing this will cause you to face weeks where your income falls short and if you receive more, well, then that’s a plus.
STEP 2: DETERMINE YOUR EXPENSES:
Next, you will list out your expenses so that you can get an idea of your normal spending habits.
By knowing your normal spending habits you will have a starting point for how much to put in your budget for expenses and where you could cut back to pay against debt or save.
List Your Expense Types
So, list out the type of expenses you have.
Here are some ideas:
- Utilities (water, electricity, heat, phone, internet, etc)
- Insurance (vehicle, home, health, etc)
- Baby Supplies
- Pet Supplies
- Auto Expenses (fuel, maintenance, etc)
- Debt (loans, credit cards, etc)
- Entertainment (cable, date night, etc)
- Eating out
- Personal (gym memberships, beauty, subscriptions)
Separate Each Line on Bank Statement by Expense Type
Next, print your last three months of bank statements; or if you don’t have a printer then just bring them up on your device.
From your bank statements you will separate all your line items or transactions into their type. You can do this by choosing one of the options below:
- highlighting each line by type; for instance, use yellow for groceries, orange for household, and so on; or
- if you don’t have a printer then grab a notebook and make expense type columns then start adding the amounts to each column
If you are a heavy spender this could take a little while, but remember you are putting together a solid budget.
Calculate Each Expense Type for Weekly / Monthly Average
Finally, you will average each type to come up with your weekly and/or monthly average.
- For one expense type, add up the amounts. EX: I will add up all my eating out expenses = $1,684.54 for the 3 months
- Divide the added total by 3 to get your monthly budget for that type. EX: $1,684.54 / 3 = $561.51
- Divide the added total by 13 to get your weekly budget for that type. EX: $1,684.54 / 13 = $129.58
- Repeat for each expense type
In the example used here this means that, on average, I spend $561.51 eating out per month or $129.58 eating out per week. Believe it or not this really is, or should I say was, my case before I started meal planning. Ouch!!
Now that you know, on average, what you spend each month and week. Let’s move on…
Side note: if you see that you spend waaaaay too much in a certain area, don’t worry, you will have the opportunity in Step 5 to take care of this.
STEP 3: WHAT DO YOU WANT TO ACCOMPLISH:
Let’s take a little break from the numbers and think about what you want the end result to be. What is your goal?
Is it to pay off debt? If so, then how much? When would you like the debt to be paid?
Is it to invest for retirement? If so, when would you like to retire? How much would you like to retire with?
Is it to save for an upcoming event or purchase? If so, what is your timeline? How much do you need?
Maybe you want to give more.
Some of you will be able to spout this out without even thinking about.
Some will need to sit down and take a moment to think about what you want the end result to be.
Take your moment. I will be right here when you get back.
Do you have your goal? If not, then we can’t move forward until you do.
If so, then let’s continue…
KEEP IT ALL IN ONE PLACE
The Simple Meal Planning Binder Sheets gives you a place to keep your recipes, meal ideas, stock item lists, and many more. Grab it here to keep everything in one place.
What will it take for you to reach your goal?
Here is where you will want to grab your Money Goal worksheet.
Let’s use my goal as an example. My goal is to pay off $88,000 in debt in four years. So, here is what I would need to do:
Pay off $22,000 each year ($88,000 / 4 years). So I would need to pay $1,833.33 ($22,000 / 12 months) towards my debt each month. To keep it simple I will round up to $1,834.
You can use this same scenario with any of your goals. For instance, you want to take a vacation to Disney World this time next year and you estimate the trip will cost $7,000 if you fly round trip. So, you need to save $583.33 ($7,000 / 12 months) each month to accomplish your goal. To keep it simple, round up to $584.
By the way, you can have more than one goal; however, you should work on one goal at a time to prevent from being overwhelmed.
Now that you know what it will take for you to accomplish your goal let’s talk about how to reach it.
STEP 4: CALCULATE WHAT YOU HAVE TO PUT TOWARD YOUR GOAL:
It is time to figure out how much you have left over once you have subtracted your expenses from your income.
This amount will be what you have to put toward your goal.
Again, you will use your Money Goal worksheet you’ve already started.
Let’s take a look at the Disney vacation example where you would need $584 per month to reach your goal:
- Net household income is $6,130 per month.
- Expenses, including all types, are $5,930 per month.
- So, there is a difference of $200 per month to put towards your goal.
- To meet your goal of $584 you would need to either trim down your budget by $384 ($584 – $200) per month or pick up some extra income to earn the needed $384 per month.
Side note: If your expenses are more than your income, then your first goal should be to balance the two to equal zero. I know this is talking about how to handle the extra money you get from meal planning but I won’t leave you hanging. We will work on this in Step 5.
This type of example would work for goals such as giving, saving, and investing but paying off debt would be somewhat different.
Why would it be different?
Because, if you have debt then some of your expenses you already pay each month include dollars that go toward that debt; unless, you have not been paying toward the debt at all.
So, let’s take a look at my goal of paying off $88,000 of debt in four years using the same income and expenses given in the prior example. To accomplish this I would need $1,834 per month to pay towards my debt.
- Net household income is $6,130 per month.
- Expenses, including all types, are $5,930 per month.
- So, there is a difference of $200 per month to put towards your debt.
- Dollars already been paid toward debt that is included in the $5,930 per month is $1,463
- Current debt payout of $1,463 plus $200 additional is $1,663 per month
- To meet my goal of $1,834 I would need to either trim down my budget by $171 ($1,834 – $1,663) per month or pick up some extra income to earn the needed $171 per month. OR a little of both.
Finally, you know what you need to meet your goal. Next we will talk about trimming your budget so that you can get closer or meet your goal.
STEP 5: TRIM YOUR BUDGET TO MEET YOUR GOALS:
Let’s be straight here.
The reason you are starting a budget to begin with is because there is something you want to accomplish that you cannot at this point.
Hence, your goal.
So, if what you are doing right now is preventing you from reaching your goal then let’s do what it takes to get you there. You’ve already made a great start by being more conscious about your food bill so let’s push a little further.
Take each expense type and determine if there is a way to lower what you spend in that area.
For instance, if you pay $120 for Dish Network then you can cancel this subscription and get Netflix’s basic plan for $8.99 and Hulu for $5.99 for your television watching needs (at the time of writing this).
Both of these services offer free trials for you to try them out first.
Making this one change will save you $105.02 per month; AND it isn’t a bad substitution for a fraction of the cost.
I did it. My husband and boys love that they can watch their shows anytime they want.
Here’s a little bonus…
If you purchase the Netflix Premium plan then you can have 4 TVs playing at once.
To lower your Netflix to even less than the basic price connect with 3 other family members to help pay.
Divide the premium price by 4 which would put it at $4.00 ($15.99 / 4) per person.
This would put your entertainment at $9.99 per month. This beats the heck out of $120.
What else can you think of?
Now that you have trimmed what you can from your budget what do you have left?
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If you have managed to trim away enough to meet your goal then CONGRATULATIONS!!!
If not, that’s ok.
You will just need to continue to visit your budget for areas to trim.
Or you can find ways to save in other areas.
Or you can even try your hand at making extra income either from overtime in your current job and by picking up a side hustle or two.
Or a little of both. OK I’m done with the ORs…
You may even want to earn extra income if you want to meet your goal quicker than you originally planned.
The sky’s the limit!
Now let’s get your budget filled out and tracking like the smart meal planner, now money manager you are!
STEP 6: FILL IN YOUR BUDGET AND TRACK LIKE NO OTHER:
It is now time to enter all that information you gathered into your preferred budgeting method.
Remember, those are the good ole pen and paper, phone app, or spreadsheets.
If you chose to use the pen and paper method here are a few budget worksheets for you to use:
Fill in your income and your budgeted expenses.
Don’t forget to add the additional dollars you found in your budget towards your goal.
The most important part of this whole blueprint is tracking in your budget.
You can decide how often you track is the best for you. Some like tracking daily, some weekly, some monthly.
If you have a lot of transactions going on then you should at least track weekly. I would not recommend ever going more than a month without tracking in your budget.
Scratch that… DO NOT ever go more than a month without tracking in your budget.
Your budget should help you, not overwhelm you.
To make it easier to track there are other methods that could be useful such as:
Cash envelopes can be used for groceries, entertainment, eating out, and other expense types that are typically bought in a store.
This is simply done by putting your budgeted dollars into a marked envelope and then spending from that envelope.
Once it is gone then no more spending.
For example: if you budgeted $100 for groceries then your cash envelope would be marked groceries and it would contain $100 to spend.
To track this in your budget you would subtract the amount you have remaining from the original amount you put in your envelope. EX: your budget for groceries is $100, at the end of the week you have $4.32 remaining in your envelope so you would enter $95.68 ($100 – $4.32) in your budget actual column.
Some say this method helps you to control your spending because you are actually handling the cash that you use.
Debit Card Envelopes
This works the same way as the cash envelopes only you use a debit card instead of cash.
Nowadays, you can open as many bank accounts as you like online.
I personally use Ally bank who I highly recommend and they have wonderful customer service.
There would be an account for each expense type the same as cash envelopes.
You can set up your accounts so that funds automatically transfer from your main bank account into these separate spending accounts.
For instance, I deposit my weekly paycheck into my personal Ally account and then I have transfers set up so that on a certain day of the week my budgeted amounts will go into other accounts automatically.
Some would not agree with this method because they say that using a ‘card’ causes you to spend more.
Although, I think it varies depending on the spender’s personality.
For instance, cash envelopes do nothing for me because cash does not have an effect on me when I spend it.
However, using a card does. For some reason it is more difficult for me to watch my bank account go down than it is more me to see my cash disappear.
So, you need to decide what is best for you and only you. Don’t let some “research says” follower tell you what you have to do because it is the best way, “so they say”.
Separate Bank Accounts for Savings and Non-Monthly Bills
Another way I like to use separate bank accounts is for the expense types on my budget that I am saving for or to save for expenses that don’t happen every month.
- Property Tax
- Home Insurance
- Vehicle Tax
- Trash Bill
Now, I don’t have a bank account for each of these.
I have one for Christmas and Birthdays, one for Clothing (in my case School for my kids), and one for Bill Payments.
Again, these accounts would have funds automatically transferred to them each week so that I do not have to think about it.
However, you decide to handle your expenses the way that is BEST FOR YOU just be sure to track in your budget.
In order to make your budget work you must be diligent on keeping your numbers.
You will never know where you fall short or do really well if your budget is not maintained.
I hope you found these steps to manage your money to be helpful and I wish you the very best of luck with reaching your goal.
Just like with meal planning and taking care of your home you have to figure out what works best with YOUR PERSONALITY. Everyone can always tell you what they think the best way will be but it just may not be the best way for you.
You have to figure out what that is for yourself. It may take a little trial and error but you have to keep working at it for the sake of reaching what you want in life.
You may start out trying to use apps to manage your money just to find out that they irritate you. Well then go try pen and paper. It doesn’t mean it is time for you to quit.
You have to keep going and keep trying.
Until next time…
IT’S UP TO YOU NOW
If you are ready to change the path of your future and starting working toward living a less stressed life and putting some extra cash back in your pocket, then you are ready to get yourself more organized.