One penny for you, two pennies for me ...
How many budgets have you tried? I had to try quite a few before I found the right fit and it was the simpler plans that worked best for me. Budget’s where every cent was allocated to a different section was either too confusing or too time consuming. So I simplified my budget to just three different sections. If you want to find out what I use (and hopefully be inspired to simplify your own) then this post is for you.
Creating a Simple Budget Plan
I was watching a TV show the other day where a leading financial expert was helping a couple sort out their finances. Each night he got them to write down their expenses so that they could see if they needed to move money from one expense to the other as they needed it. It was supposed to help them keep track of where their money was going so they didn’t overspend.
I was exhausted just watching it! Now I know budgets are important but who wants to spend the end of the day trying to figure out if you should take twenty dollars out of the entertainment expenses to put into the food budget? .. No thanks – too much work. I’d rather watch Cougar Town thank you (a note to ABC when is it back on? – I miss my cul-de-sac crew).
Step 1: Determine Your Income
So all I do is firstly work out how much I earned that month (it varies depending on how many books I’ve sold, or how much money my websites have made that month) and keep it in an excel spreadsheet. If you have a set salary it will be much easier to keep track of because you’ll just need to write down your take home pay.
Step 2: Take Out Your Savings
Before I do anything else I take out my savings. Generally it’s 10% of what I’ve earned but sometimes it will be higher if I’m saving for something special or the credit card has crept up a bit.
But generally 10% is a good ball park to go for.
The reason I like to take this out first is that it’s done and I don’t have to worry about it anymore. You’ve all heard ‘pay yourself first’, well this just a simple version of doing just that.
Step 3: Pay Necessary Bills
Next you’ll need to pay your regular expenses for the month and any bills you might have. Generally this will be similar month to month but sometimes you might have a yearly bill you have to pay. If you don’t have enough money to pay all your bills one month then you might have to take some out of your emergency fund account.
However if you are struggling to pay your bills EVERY month then you’ll need to seriously look at your lifestyle or work out ways of bringing extra income in.
Step 4: Spend The Rest
What, a financial blogger telling you to go ahead and spend the rest of your income? Craaazzy. Yeah I know but you’ve ALREADY taken out your savings and ALREADY paid all your bills for the month. So the money that’s left over is yours to spend.
Of course if you are being extra good you don’t have to spend all of it (perhaps you can put more into savings) but generally you are free to do whatever you like with it. Unless you are doing a spending detox month of course, then it’s no spending at all. But you probably only want to do a spending detox occasionally when you need it, not every month.
So go ahead. Buy whatever you like. But only use THIS money – not extra money from credit cards! That way you won’t be impacting any further debt. Because debt is bad, but spending (when you can afford it) is fine.
So there you go. My simple rules budget. It’s pretty simple, you just:
- Pay yourself first – 10% of your monthly income to savings (or paying off debt)
- Pay your bills second
- Have fun with the rest
Enjoy.
T xx
