What's in your wallet?





Ready to budget?

Whoa whoa whoa. Slow down. First erase everything you think you know about the paper pen budgeting. Its nonsense. In a perfect 2 dimensional world where we actually achieve every goal we've put to paper, then yes you may proceed with penpaper budgeting.

Step one- Have a print out of your debit card statement for the last three months.

Step two- Have check stubs from the last couple of pay periods.

Step three- Grab at least three sheets of clean paper and a pen. Grab a drink while you're up too. :)

Step four- Review your information going over every significant purchase once and every insignificant purchase twice. Make sure to highlight or mark items you pay every month, purchases you make once every couple months and luxuries you can't remember buying.

Step five- Using one of the sheets of paper, label the top "Have To". "Have to" purchases or expenses include things that are not negotiable and must be paid every month. This includes: Rent, Utilities, Car Payments, Insurance, Phone. etc. If you're confused, for the most part, anything that costs the same amount of money each month. Start a column and write the names of every "have to" expense on its own row. Create a new column next to this one and put in the amount with a grand total at the end. Push this paper aside and continue on.

Step six- Label your new paper "Just Do". "Just Do" purchases or expenses are things that you don't necessarily have to do but without alot of effort on your part, seem unavoidable at times. "Just Do" purchases include pumping gas, credit card bills, utilities, cable tv, etc. "Just Do" expenses fluctuate often in times with a little more effort on your part can be lower. Remember that whole turn off the light when you leave the room? Or make sure the air pressure in your tires is correct? Follow setup similar to the "Have to" list except now we're going to average out our expenses by adding the information we gathered from our bank statements. Tally the totals and then take the average payout for your "Just do" purchases for the last three months. Push this paper aside and continue on.

Step seven- Label your new paper "Want to". All the other purchases you made... ya. They get thrown into the "Want to" category. Get busy... You have a lot of them. Average them out like your "Just do" purchases and look at your results.

Congratulations you have a budget! Well you had one before, you just didn't get it looking straight back at you. Its kind of like a diet. Even if you're not ON a diet, you still have one.

Your budget includes expenses that you "Have to" make as well as "Just do" make, plus all those purchases you "Want to" make. No amount of idealistic penpaper budgeting could have shown you this.

So what now? Well we move on to the next step to see how to live within our means!

Step eight- Turn over one of your papers (we're saving money people!) and at divide it into the number of payperiods you have in one month. I get paid weekly, so I would divide my paper into at least four columns. Most of your "Have to" expenses have a due by date. Think of each divided section of your paper as a portion of the month, whether it be the beginning, end, middle, quarter... label the top accordingly. Create as many rows as you need, but the top row needs to contain the amount of one of your last paychecks. Begin filling in your rows with have to expenses that are due at the beginning of the month... then the middle... or if you out of columns, what's due at the end of the month. The last row should have a total remaining amount, if any.

My example is very nice as there is plenty of money to put towards savings or investments. But lets say you don't have any money left over or worse you're in the negative. This is a classic sign of some one living outside their means. The only way to fix this is to tackle your "Want to" and "Just do" lists. Its much easier to pick up the phone and ask your credit card company for a lower rate than it is to quit smoking or curb the majority of your "Want to" habits, so start with the "Just do" list first.

Check for cheaper utilities-gas, water, electric, cable, cell phone, internet... etc.
Conserve gas- combine trips and errands, carpool, check your tire pressure...
Ask for a lower interest rate on your credit cards, or stop using them.

After you've exhausted your "Just do" list, move on to your "Want to". Start taking baby steps towards cutting your expenses by a quarter. Eat out only on certain nights, cut coupons, go to the early matinee and sneak in your candy ;), listen to pandora for free instead of downloading songs on itunes, smoke only half a cigarette at a time... Whatever you feel you can do to save money, do it. You'll only make yourself stronger and keep your money in your wallet where it belongs.

Also take into consideration all of your undocumented cash purchases, loans, school costs, vehicle maintenance, etc. Seems when you have all of your eggs lined up, something comes along and steps on your basket. Or something like that. Plan ahead and start building that emergency savings account. You'll thank yourself for it later.

I hope my budgeting tips help you. If you have any questions at all, don't hesitate to ask.


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