Rule #1 when creating a budget - MAKE IT SIMPLE. If you are spending hours on your budget, it’s time wasted. Starting out, it may take a little time to get the hang of it, but it shouldn’t take hours.

Everyone has a budget. Every month you sit down and answer the following questions.

1. How much money do I currently have?
2. How much do I owe, and when is the debt due?
3. What do I have left after paying off the must haves?

Example

This chart is the beginning of a budget. All fixed expenses have been accounted for. In our example there’s $1,116.00 left. Most people at this point stop, but here’s where the budgeting comes in. You still have obligations. Other things you need to spend money on. These are your variable expenses. You have more control over these expenses but you need to manage them. Variable expenses need to fit within the remaining $1,116.00.

Variable Expense Example

Given this simple example you have $266.00 remaining. With the remaining $266.00 you can now fund your emergency fund, your retirement fund, increase your debt repayment, or put it in a savings account for a vacation. Remember, we started with how much money the person had, so these are projected figures. Only two items have a fixed date so these charges may occur anytime during the month.

With these two steps you now have the beginning of your budget. Simply apply your categories and totals.

If you agree with what you have, copy your budget figures over to the following month. You’re then done for this month.

Next month, do your payment calculations for your fixed expenses just like you always do. Then, document what you actually spent on your variable expenses. This will tell you if you’re spending too much or you estimated too little. Estimate your variable expense for the next two months. This is also a good time to project future payments coming due that aren’t monthly, such as license renewal or taxes. Your budget should have figures for at least three months. This will help you plan for expenses that aren’t monthly and keep you from scrambling at the last minute.

Once you’ve gotten the hang of your budget you’ll move automatically into planning. Each month you have a question to answer - what do I do with my excess or why don’t I have an excess? This question will force you into making the changes you need to make in your life. You already create a budget monthly, I’m just saying you don’t have to start from scratch each month. Give it a try and let me know how it goes. It should make your life easier. Remember, keep it simple.