Creating a budget...where to start

I've had a few questions on where to start when making a budget. I'll be honest, figuring out what each amount needs to be in your budget is the hardest part. It takes lots of trial and error on paper before you can make one that works. Once you get that figured out, you will be smooth sailing:)

I'll try to make this as simple as possible...this is how we started:

Start with how much money you will bring home in a month (this is a little more difficult if that figure is flexible). Let's say you bring home $2000 a month or $1000 bi-monthly. As I mentioned in a previous post, we take out our tithe money before we do anything else. If you brought home $2000 a month, we will pretend that you actually make $2400 a month and therefore if you tithe, it would be around $240 a month. That comes out of the $2000 take home pay.

$2000 monthly income

-240 Tithe

$1760

Now make a list of all of the amounts that you HAVE to pay each month that do not change. For us, those amounts include:

Mortgage/Rent

Car insurance** (Some people pay this monthly and others annually or every six months. If you do not pay this monthly, you should still put the money back each month so that you have it when it comes due)

Cable 

Phone

I'll assign a guess on those totals to make the point.

$1760 remaining

-700 rent

- 80 car insurance

-50 cable

-100 phone

$830

Now make a list of other necessary expenses that might fluctuate:

Gas

Utilities (heating/cooling and water)** (We usually see a drastic difference in this between the winter months and the summer months)

Miscellaneous (things that don't fit anywhere else such as paper towels, cleaning products, etc.)

$830

-150 gas

-150 utilities

-75 miscellaneous

$455

Food- we budget $300 a month for food (including eating out) for the two of us. You would need to adjust this based on how large your family is. 

$455

- 300 food

$155

Now make a category for things you may need once in a while, but not every month:

Doctor/Dentist- $20

Gifts- $20

Blow money- $30 (only if you have everything else covered)

$155

-20 doctor/dentist

-20 gifts

-30 blow money

$85

With the remaining $85, you should designate this to areas that you need. If you have a credit card, make payments on that (disclaimer- if you have a large credit card amount, you should probably use most of your blow money on that each month). If you can ever make more than the minimum payment on debt, make sure you designate any extra to 'principal only.' Otherwise the interest gets the majority of your extra payment. Once you've paid something off with that $85, you should then apply that amount to some other form of debt, such as a car or a loan of some kind.

It's hard to make a fake budget without knowing what you make a month, what all you HAVE to pay (and the amounts), and how many are in your family but I tried to give you a rough idea. More to come on the actual spreadsheet. It involves formulas that you can plug in but I need to look at how we did that since it has been so long ago. The concept is basically starting with a figure in each category and then having the computer subtract for you each amount that you spent. There are also free budgeting tools online that you could use if they fit your needs. As always, let me know if you have questions:)