The Budget

A what now?

If that is your first reaction to the word BUDGET, you may want to sit down which unless you surf the web standing up, you probably already are.

You will need a budget to keep track of all your expenses and income. As Benjamin Franklin, who should be the patron saint of budgets said,

Annual income 20 pounds, annual expenditure 19. Result happiness. Annual income 20 pounds, annual expenditure 20.06. Result misery. Hopefully, that isn”t too much math for you.

You can use your budget to really squeeze every penny out of you salary and other income sources. You will probably be surprised by all the little things you purchase that you really don”t need and how they add up. Going out to lunch or just getting coffee everyday can start costing you $50, $100 or more a month! To start cutting down and prioritizing your expenses, let us start a budget.

An easy way to setup a budget is either in a spreadsheet on a computer, or in a notepad. You will want to make some categories. You can start with the basics. Housing, food, insurance, utilities, entertainment, taxes, one-time expenses and the ever popular, misc. Don”t get too crazy and make tons of categories. This will only confuse and annoy you and you will not want to make a budget and stick with it.

Once you have a budget set up, you have to put stuff in it! Keep track of what you spend in a month and use that as a baseline. The next month start averaging the previous months expenses and income to start getting a great picture of your situation. Once you have your expenses tracked, you can figure out how much you need to live on and what categories to really put the smack down on. One of the first to be lowered will probably be misc and entertainment. Obviously food and housing will need to stay the same because you can”t have a family in a tent. You don”t have to get it right quite yet, you have a little wiggle room. Try to aim for spending no more than 120% of your main income earner”s salary. So, if you make $3000 a month, try for a budget of $3600 a month. You will eventually have to tweak it down because debt is bad but you will have some time to get used to the fact you will not be buying those $200 shoes you wanted.

Hopefully you can have a budget for a year or so to really get a feel for the cost of your life. At the very least, you should have 9 months to figure it out. Don”t worry about keeping track of every penny, but try to keep it honest. You may not think those coffees are expensive, but over a year it will blow your mind.

After the baby is born, don”t worry about living in that budget for a few months or as long as you can. Since you will have a nice safety net built up, you won”t have to worry about going over budget (you will). Once you have had a few months, you can adjust your budget to make sure that it is an accurate representation of how much life costs. You will always find items that slipped your mind or those pesky one-time expenses you don”t normally think about. These include property taxes, life insurance, and holiday gift giving.

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