Adulting 101 - Budgeting

What is a budget, why should you budget and how do you begin one.

A budget is a plan that tracks the income that you and your spouse/partner make versus how much you spend and at the end of the day/month/year, how much is left.  

A budget can be for a specific event, like a vacation or for your day to day life.

You should always budget to make sure that there are no surprises regarding money.  If you create your plan and you stick to it, you will be able to pay off bills or save money, go on that vacation that you wanted to go on, buy that car or the house.  Whatever you want in life, budgeting shows you how and when you can do it or even if it is possible.

A simple budget is to right down or enter into a spreadsheet the money you make each month to start.  

Income $4,000 per month

Next what are the expenses that don't change each month.  These are called fixed expenses, like rent, your car payment and Internet

Fixed expenses $1,050

Next what are the expenses that do change?  These are called variable expenses, like electricity, water, food, for example.  

Variable expenses $500

Next put in your expenses for entertainment, Cable/streaming and any other expense that is not something that you have to have, but do spend money on.  

If you have any outstanding credit card debt, enter an amount to pay off the balance.  Don't just make the minimum payment in order to pay it off quicker.

Other expenses - $600

Credit Card Payment $300

Finally put some money is savings.  This can be for buying the new couch, an upcoming trip, or most importantly for the future expenses.

Saving $1,000

Now let's put it all together and see what is left at the end.

Start with your income and then subtract all of your expenses.

Budget 

Income - $4,000

Fixed Expenses - $1,050

Variable Expenses - $500

Other expenses - $600

Credit Card Payment - $300

Saving - $1,000

Net (what is left) - $550

Now decide what to do the Net.  If it is greater than $0 you can put more in savings or more toward Credit Card debt. 

If it is less than $0 than you need to adjust some stuff.  Reduce some of your other expenses if you can.  

The goal is to at least be at zero at the end of the month or positive.  

If you are negative than you are likely to fund the negative with more credit card debt.  This can be very easy, but also very dangerous.  

Try to do everything you can to get that Net (what is left) to be a positive number or $0.  

The best way to know where you are is to start with the simple budget and be very honest with yourself.  

I will be going into other ways to reduce the expenses if you are negative in future postings.  

Virtual Dad