Friday, January 23, 2009

Frugal Momma - The "B" word!

Oh, yeah. I'm gonna say it. Budget.

So you're supposed to have one...but how do you decide what to do & when to do it? Well, first, the budget should apply to everything. From groceries & utilities to vacations & after school activities.


1. Decide what items have to be paid at a fairly standard rate every month. This includes your mortgage/rent payment & most utilities (including things like car insurance).

Using some made up numbers, I'll give you an example of those costs:

  • House - $850
  • Electricity - $125
  • Phone/Internet/TV services - $150
  • Auto insurance - $100

I know some people pay for gas & water, but I wanted to go basic here, to keep my math easy! ;) Alright, so that total is $1,225.00. Forget for now that most people cut off their TV services & often the home or cell phone when they are trying to save some money...I just need an example.

2. Every time you get a paycheck, put at least half that amount into checking. The half of that is $612.50, but if it were me, I'd round up to $620.

If the average family income is $50k (ish...I believe this number is combined for the whole household), then you are bringing home approximately $1,923 for a 2 week pay period. If we subtract 20% from that...assuming you are having SOME kind of deductions taken out from taxes to benefits that leaves you with a take home pay of $1,539.00. Putting your first $620 away leaves you with $919.00 to spend.

3. Take cash out for the unfixed items. Gas, food (grocery & eating out), clothing, work/school events, etc.

These may take some time to figure out. You might have to do some research...find out how many miles you drive to & from work and school. What does your family spend at the grocery store, and how many times a week do you get take aways or fast food? How often does clothing need to be replaced, what about shoes? How much do you need to pay to events like field trips, sports teams, the office pool for birthday cake??

As you are figuring these numbers out...try to decide what you can cut out. If you bought 5 pounds of ground beef last week...why did you eat out 4 nights in a row? Can your child walk to school, carpool or take the bus instead of being driven? Can YOU walk or take the bus...or carpool? If you explain to the office party planner at work that you are trying to keep to a budget...can you refrain from adding to the birthday kitty? You wouldn't expect cake on your birthday or worry about having a piece on other's days. (I have done this...and trust me, it's not that weird. Sing the song, clap...and go back to your desk.) Cancel the daily newspaper (or get it only on weekends), make breakfast at home, make coffee at home, if you bring your work home with you...don't print it out at home. Get to work a few minutes early to print it out there instead.

Here is another sample budget for those items:

  • Grocery store - $200/2 weeks.
  • Gas - $75/2 weeks.
  • Non-food shopping - $100/2 weeks.
  • Unexpected errand - $50/2 weeks.
  • Fun money - $50/2 weeks.

Yes, this is a fairly short list. But again...I like simple math. Notice I separated my grocery store money from my non-food money. If you make a point to only buy food at the grocery store, you will notice a difference in your bill. I don't do diapers, detergents, or clothes shopping with my food. (I say this mostly b/c so many use super stores now, that yes, it does happen that you will be in the same place with those things.) If you decide to buy some of those during your grocery trip...put one of those plastic dividers between the items and have the clerk ring up two separate transactions. They won't look at you funny...Not about this anyway. :)

Unexpected...ugh. You know what I mean. The midnight trip to the drug store for cough medicine, on the way home your kid tells you that he volunteered you to make 3 dozen cupcakes for his class tomorrow. If you don't use it...leave it in place for the next unexpected event. Or keep adding to it for a family surprise!

And yes, I did want to leave you something to enjoy. Fun money can be your fast food money...a special treat from the vending machine. (Mmm...C7 you call my name!) Whatever you need it to be. You don't have to spend it all...you can always save it up for a rainy day...when you need a real pick me up...or if you want something special like a mani/pedi. Or a paintball gun.

Okay...those totals are $475.

4. Get an accordion organizer...the ones for coupons are PERFECT. Label each section for each of your cash expenses. Separate your cash by need. When you shop, replace it with a receipt (for future research...to know if you should adjust your budget)...and when it's gone...it's gone. You don't do any more shopping!

Alright, so we've got our money in checking & our cash in the organizer. That leaves us with $498.

5. Put the rest of your money into savings. If possible, get a savings account that you can't just click a button to transfer funds from savings into checking. If you have to make an effort, you may decide that the purchase isn't worth it.

6. Now, after 2 paychecks you can pay your monthlies right out of checking. See if your bank has free online bill pay services...or just go traditional & write out a check.

I realize it may take a few pay periods to get used to this. And you may not be able to put as much into savings at first. But if you give it a chance...you'll at least have something that resembles order & a good start to a home budget plan. Be sure to take a look at your receipts and billings statements periodically to see if your budgets need to be adjusted. If you find you are spending less than expected, put a little less cash in the organizer.

A friend of mine recommends paying utilities with the same amount every month, regardless of the statement (assuming you are paying over rather than under). This way, at the end of the year you may have enough credits to cover a whole month. That extra money might come in handy if you are the sort to celebrate holidays in December!

That money that gets put into savings can go for emergencies, nest eggs, vacations, or whatever you decide your family needs. Maybe periodically set a goal for a certain amount in your savings. Then make an extra house or car payment, decorate a room, replace a mattress.

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