Friday Financial: Sonya's Budgeting Tips

Hello friends!  I wanted to start this new series called First Friday Financial that will cover a wide variety of topics within the topic of money and finances.  I think that this is a very vital topic that we all need to at least have basic knowledge on.  If you have any particular questions that you want covered or if you would like to be a contributor in the future, please contact me and I'll set it up.   

Meet our first FFF contributor, Sonya, who will be covering the topic of budgeting and becoming financially fit.

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My name is Sonya.  My husband and I have been married for over 8 years.  We have two preschool aged children.  I work full time, outside of the home.  I love to cook, bake, read, and am a photography enthusiast. I document our lives at www.ladybugsbutterfliesandboxing.com

  

Creating a budget and working your way to being financially fit can be a daunting process.  I like to break it down into smaller steps, do one or two at a time and work up to living fully within the newly created financial plan. 

When creating a budget there are several steps I like to take first.  I think it is a good idea to find out where you are at now and then from there you can decided where you want to be.  The first steps will take some time so you may not be able to immediately jump into creating your budget.  But this will show you exactly what you are spending and where you are overdoing it and creating a “budget leak.”

Tracking Expenses

The first thing you should do is track your spending for 30 days.  ALL spending.  Every time you go to the drive through.  Each time you buy that designer coffee. Cash, debit, credit, checks, anything…track it all!  Even if it is just a dollar, keep the receipt and log it onto a Receipt Ledger spreadsheet.  When we first started doing this I went as far as to break down my store receipt items into their own categories {car, health and beauty, over the counter medicine, clothing, etc}.  I wanted to make sure I knew what I was currently spending, where I could make cuts and where I was going overboard.  I also wanted a cold hard number to plug into my budget spreadsheet.

FInancial Snapshot

The next thing I like to do is take a financial snap shot.  You can get a jump on this and do it during the 30 day expense logging time period.  I gather all my bills, write down monthly payments, balances owed and their due dates.  I have a spiral notebook where I write down this information each and every month since most of the items change regularly.  Throughout the month as I pay bills I also use this as a checklist.  You could also enter this information onto a Finance Checklist spreadsheet.  This information will ideally be the starting point for your budget.  These are the items that must get paid to avoid having utilities shut off, negative reports on your credit, etc.  

Budget Spreadsheets

Once I have this information I begin filling in a Budget spreadsheet.  I like spreadsheets for several reasons, one is to have all my information in one place; two because I can set a formula to have everything total for me; three is because I can make them colorful, personalized and pretty, change them from month to month/year to year; and four they are also easy for my husband and I to look at together and make changes when necessary.  If you are sharing your finances with any other person it is important for these things to be done together.  Both parties need to be on the same page in order for a budget to work!

Creating a Budget

Once you have already figured out what MUST be paid each month and once you have tracked your spending fully for one month you can start to create a full budget.  Look over your spending log.  What areas seem high?  Are you over your monthly income?  Etc. After I have assessed my spending and decided what is a good amount to be spending I then take to my budget spreadsheet again and start plugging in the numbers.  Once I have filled in all my necessary categories I look to make sure it is in line with how much money is coming in.  If we are over that amount I start cutting back in the more frivolous categories such as eating out, clothing, etc.  If we are under budget I look at areas to pay down debt or add to our savings! 

The "Envelope System"

Now this next part is where I get pretty geeky with my finances.  Way back in the day when my husband and I first started dating his finances were a hot mess. So I created for him what has now become known as the “envelope system” only I did it with savings accounts and not cash envelopes.  We bank with a local credit union which allows us to have multiple savings accounts.  Each time we get paid a little bit of our paycheck gets divided into these different savings accounts which are all named with their specific purpose: Mortgage, Utilities, Car Expenses, Etc.  With each of the budgeted categories I take the amount and divide it by how many paychecks will be coming in that month and each time we get paid, I transfer that amount to its allotted savings account.  When it comes time for the bill to be paid I have the money right there in my savings account.  I simply transfer it, write out the check or pay the bill online!

**There are several ways to create a budget.  There is no right or wrong way.  I am simply sharing what has worked for me and my family’s situation. 

Helpful documents and links:

1. Blank Receipt Ledger Worksheet
2. Blank Budget - Detailed
3. Blank Medical Record Spreadsheet 2012
4. Blank Finance Checklist 2012