I have often heard the council, "live within your means." Excellent advice. We live in a time where people use credit cards to pay of other credit cards. Everything is "buy now, pay later." Debt is a plague. It never sleeps, it never takes a holiday, and if not taken care of, it grows rapidly. If there's one thing my parents have taught me in addition to the gospel, it's how to budget. Because of their love, support, and good council, I managed to graduate from college debt free with money in the bank. Brenton and I were able to get married debt free. Now that I am working in a secure job, we are in a fantastic position to save and prepare for our exciting future. This past weekend we factored in my new salary, and created a budget based upon the system my mother taught me in college. It's fantastic advice, so I thought I'd share it with the rest of you.
Step 1. Pay your tithes and offerings. Before you even open the envelopes containing the bills, pay your tithing. Before you budget your monthly income, pay your tithing. Each month, contribute a generous fast offering. I can testify that as Brenton and I have done this, no matter what the situation we have always had enough. It is always the number one priority when it comes to finances. You cannot expect anything else to work out if you have neglected this crucial step.
Step 2. Make a list of everything you have to pay each month, no matter what. Rent/mortgage payments, utilities, cell phone bill, Internet, insurance, etc. These bills typically stay at a set rate, so next to each item, write out the price you pay each month.
Step 3. Add on to your list things that you have to pay for that are not at a specific rate. Things like groceries, gas, entertainment, and eating out. Commit to a reasonable amount that you know you can stick to. If you make a completely unreasonable goal, you won't keep it, and you might as well have not created the budget in the first place.
Step 4. Set aside money each month for your retirement fund. The earlier you start, the more it builds up. Next, set aside money each month for your emergency savings. This fund is for "rainy days," like when the car breaks down, or your basement floods, or you have to go to the hospital, an emergency root canal, etc. If you don't put aside money for this, life's little mishaps will catch up with you and you won't be prepared.
Step 5. Always have a miscellaneous category. Because every month you will have some random expense that you won't know where to factor in. You bought a new pair of shoes, or decorations for your home. It was somebody's birthday. You found a really great deal on windshield wipers, things like that. Give it a specific amount that fits within your means.
Step 6. Any money that you have leftover after everything else has been factored in, use as a "flux" category. Because let's face it, each month there's always something that needs more money than you thought. It's a family birthday, you need to buy new furniture, Christmas shopping, painting a bathroom, etc. If you plan in advance with the flux money, these expenditures won't throw you for a loop. Also, if you don't have anything that month that requires the flux money, put it in a separate fund for a vacation in the future.
Step 7. Once everything has been given a category and a specific amount has been assigned, MAKE SURE that it does NOT go over your monthly income. And double check that you have already taken out the money set aside for tithing and fast offerings when looking at the numbers for your monthly income.
Step 8. Next to the column that has each category's allotted amount to spend, create a column to enter in the amounts actually spent that month. Make sure that you are keeping good track of this. Use whatever system works for you. Track it online, in a checkbook, on a chart in your wallet, and always verify with receipts or spending reports.
Step 9. If there is a difference from the amount planned or actually spent in a certain category whether negative or positive, write it in the column next to the amount actually spent. Make sure you mark whether it's leftover money, or if you're in the red.
Step. 10 Next to the difference column, make a column entitled, "Compensation" and for each category that has a negative or positive difference, write down where you are going to take the money from, or what you're doing with the surplus. For example, if you went over in the "eating out" category, in the compensation column write that you took money from the grocery fund to cover it. If for any reason at the end of the month you are still in the negative, factor that into the next months budget by decreasing the amount there.
I have found that this system works. If you don't keep a budget, it's so easy to lose track of your expenditures and fall into debt. By keeping track of everything, it disciplines you to live within your means, and save up for something better. As always, remember that tithing and fast offering always comes first. No exceptions. Even if that means you will not be able to pay for something mandatory. The Lord will provide a way. I know this to be true.
So happy spending! But remember to keep track and stick to the plan!
