Budgeting for Life

Anna and I have worked insanely hard to be financially healthy.

The point of this post is to share our budgeting “technique,” if you will.

It may seem like a simple post, but those are generally the best ones.

Step 1: Calculate your expenses.

We separate our expenses into a variety of categories. Choose what fits your situation best. Each category has it’s own “digital envelope.”

The key is to make sure each envelope is funded each month BEFORE bills are due.

Tip: BudgetPulse.com and Mvelopes.com are both good apps to do this with.

Possible expenses:

• Rent = $925
• Groceries = $375
• Cell Phone = $130
• Utilities = $90
• Total = $1,520

Always over estimate your monthly expenses and under estimate your income. This gives you “wiggle” room in the future and an extra “savings” of sorts. (Let’s say you miss a week of work. No worries. Over time, extra money has been put in those categories) In this case, you might round up everything for a total of $1,650.

Total Monthly Expenses = $1,650

Step 2: Find Monthly Expense Percentages

To do this, divide your expenses INTO your monthly income.

So for example, if the rounded up “Rent Expenses” are $1,000/month, you know that it’s roughly 34% of your total income.

Here’s the breakdown:

• Rent = 34%
• Groceries = 13%
• Cell Phone = 5%
• Utilities = 3%
• Savings = 15%
• Giving = 10%
• Other = 20%
• Total = 100% – This should always equal 100%.

The point of giving your expenses a percentage is that no matter what time of the month you get paid, those percentages will fund your envelopes.

I’ve included a screen shot of how we do it.

Your income should always have a purpose (even if it’s for entertainment) as soon as it hits your bank.

Note: You’ll also want to create a “Credit Card” envelope if you decide to use a credit card. I recommend NOT using them if you don’t have parameters or self-control.

The idea here is that over time you should put money away FROM the appropriate envelope INTO the credit card envelope. That way when your credit card bill is due, the necessary money is all there. (Mvelopes does this very well.)

Step 3: Calculate Monthly Income

I recommend underestimating your income as well. If you make $3,200, for budget purposes assume $3,000 if you can. This will leave you some extra wiggle room and more savings.

Calculate Monthly Income = $3,000

We’ve set up our Spread Sheets to “spit” out the correct amount each envelope needs. Simply multply the “Income Field X Category Field.” 

 

We then “assign” or “move” that money to the appropriate folder. By putting in your fully monthly income into the Spread Sheet, you should come out with enough money to cover every monthly expense.

While we are not independently wealthy, God has blessed us with wisdom to manage our finances.

Either way you do your budget, just keep one. You can make it less complicated than this one or less. But it’s important to KNOW where your money is coming and going.