How to do a budget?
 

I seriously was never taught money management. I want to make up a budget and stick to it...but I'm not sure how. Our income is never the same. Hubby works 4 and 4. So each pay period is different. I work casual so some weeks I get zero hours, some weeks I work 8, some weeks I work 16. It all depends. Our bills are never the same. How do I do it?

Google Gail Vaz-Oxlade. Her website has a lot of great information. I don't know if you watch "Til Debt Do Us Part". It is a Canadian show that she does. This website has an interactive budget that might help you get things sorted out. Good luck!

Dave Ramsey shows you how to do a budget with a variable income. I would suggest reading "The Total Money Makeover" or looking at his website (just google his name). He has these "baby steps" for getting out of debt and saving, and IMHO, the first, setting up an emergency fund, is KEY, especially if you are on a variable income.

A lot of people love him and others can't stand him - he uses a tough-love approach, FYI.

There was a "til debt do us part" marathon on the other day. As I was cleaning my house and doing other things I had it on in the background. It must have subliminally rubbed off on me, because I found myself starting to plan a budget and get my finances in order! lol.

First step - only bring enough cash during the week to work for EXACTLY what I need (i.e., coffee daily and sushi on thursday). This will help prevent eating those passion brownies and samosas that just happened to fall into my hands when I get my coffee because I have the extra money with me!

~CGH~

If your pay periods are different, I would bring out the scope of your budget to say, monthly or quarterly. Whatever period starts to bring more consistancy. (Income earned + Savings) - Expenses = Acct Balance

I list the formula even though it's common sense, because it highlights the fact that there are 3 components of your ending acct balance. Most people get hung up with one.

To create a budget, first gather all of your income, savings and expenses records for the past 6 months. If you don't have these, start tracking them for a few months. Separate the three categories by whatever period you decide to use. What is your average income, savings and expenses? Now break it down further. Where does the income come from and when? How much are you saving? What expenses comprise the total and what are thier averages. Once you have created your past statements, you can then decide where you want to re-prioritize things. For example, when I did mine a few years ago, I realized we spent 1/4 of our income on food!!! WOW!! Restaurants were eating up our available cash. As you subtract from expenses, you can either add to savings or ending acct balance - your choice.

Obviously many of your bills may be monthly and yet you may be using a quarterly period. Fine. Allocate 1/4 of the annual expense to that quarter and then make sure that the same amount of income is there to cover it. The budget is a recording tool and prediction model, not a cash basis account balance. When you evaluate whether you spent too much on incidentals, look at your quarterly incidental expense compared to your budgeted expense and last quarter's expense. But when you go to Target, have an amount in your head of this quarter's allocation and where you stand with it.

I hope that made sense? There should be some excel models out there for you to use.

Many people focus on only the expense side and take the stance that they need to cut out from all areas. I don't think that method is the best. You may really enjoy coffee everyday. Maybe coffee is your hobby. Whatever, you get the idea. Cutting it out or drinking cheap coffee would be a big sacrifice. But maybe you found that you spend more money on your cable bill than you care about. Cut that out and keep drinking the coffee. For me, travel is my "thing." I drive a cheap car and live in a modest house, but we take 4 trips a year. It might seem extravagant to some, but not if you look at the big picture. Saving money is great and necessary, but so is living your life. Just make sure your money is going where you want it to, so you can live your life as you choose.

Bottom line - budgeting is about noticing trends and steering your resources in the directions that matter most to you.

I have made a list of all our bills by when they're due. Since dh gets paid twice a month. I pretty much split the bills by when he gets paid so that they're not behind. I pay whatever is due once he gets paid, so some will get to where ever they need be early. Whatever bills I have that will be directly taken out, I make sure I account for that money and not look at it.
I also bought a coupon holder to store our budget money for groceries, gas, and Dining out. I do take out money for allowances for he and I.
Example: (This might sound low in some areas but we're trying to get ahead and not use our debit cards....just strictly cash only)
Groceries-$250.00
Gas-$150
Dining out-$50.00
allowances-$40.00 (we split this)

mind you this is to get us by for 2 weeks. So far its been working out great. Gas is the way it is because dh works an hour away. Dining out will fluctuate from $40.00-50.00 depending if we use it all. Last week we did the higher amount and didn't use it all so we may drop it back down to 40.00
Whatever is in the bank will be put away for savings and a portion will go to vehicle maintenance, clothes for the kids or us or dog food. Whatever personal thing we want, we use our allowances. So we'll have to save our allowances if we want something more pricey. I might want a dress I'd have to save up for.

I'm taking a financial health program through my insurance provider...they advise creating a "spending plan" rather than a budget. Here are the guidelines, in your case I'd just use your average monthly income:

Take your total monthly income and set aside 10% for savings. The next 20% should go towards paying off short-term debts, and the rest (70%) for your usual expenses, such as rent/mortgage, food, clothes, entertainment, etc.

Remember to each month, pay yourself first. That is, always put aside your 10% for savings before paying others.

I also second that advice. Recently I have been getting the bank to take out money automatically every two weeks and put it in an RRSP. I started out with $100 (so $200 per month which is approx 10% of my income) but can't afford that right now as I only have one job. So I just let them take out $50/paycheque ($100/month).

In only a few months I got an RRSP T4 slip saying I had $400 in my RRSP already. Wow - honestly I totally forgot about the fact that the $50 was even coming off my paycheque! and now my RRSP is already getting built up.

~CGH~