How To Create Your Budget and Actually Follow It (Pt. 1)

So now that Christmas is over, the purchases have been made, the credit cards have been run up, and the year is almost over.  When I last wrote, we were discussing how to get your significant other on board with this whole "budget thing".  Well now, it's time to put a budget together.  One method of starting is taking your "take home pay" (the money that gets put in your back account) and utilize some pre-made categories and percentages to that money.  Here's a range of some percentages of how to put together your budgets.  So to do it here's our formula:

Monthly Income x Category Percentage = Monthly Amount for the Category

ex....   $4,000 x 15% = $600

I'm going to now show you how to balance your budget using categories and percentages as a guideline.  That's right, I'm going to show you how you can create a budget where every dollar you bring in your home is organized and spent wisely.  You'll be surprise how much money you actually have each month.

The following below are some typical budget categories you'll see for a family.  Next to the category is the percentage of TAKE HOME PAY that helps as a guideline for figuring out how much money should be in each category.  Of course, each category has be adjusted accordingly after apply percentages to make sure that all of your expenses add up to equal your income.

CHARITY - 10 -15%

SAVINGS - 10 - 15%

HOUSING - 25 - 35%

UTILITIES - 5 - 10%

FOOD - 5 - 15%

TRANSPORTATION - 10- 15%

CLOTHING - 2 - 7%

MEDICAL/HEALTH - 5 - 10%

PERSONAL - 5 - 10%

RECREATION - 5 - 10%

DEBTS - 0% (Target should be 0%, but if you have some debt then this depends on how much you owe)
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OK, so let's put together an example budget!!!!

So let's show a typical family of 5, total income of $70,000 gross income w/ $12,000 of consumer debt.  I used the percentages above to figure out how to allocate the money for each category.  However, it ended up being more expenses than I have income.  Therefore, I had to reduce amounts in each category.  So below, you'll see the monthly budget for this family with the new percentages after adjusting them.

(To determine take home pay, we're going to assume that 20% of this family's gross income is going to state/federal taxes per month and standard benefits like medical,dental,vision, etc...)

Family Stone Monthly Budget 2015

Monthly Income = $4,667

CHARITY - $467 (10%)
   Local Church - $234
   Family Charity - $234

SAVINGS - $467 (10%)
   Retirement - $267
   College Savings - $100
   Emergency Fund - $100

HOUSING - $1,100 (23.6%)
    Mortgage - $1,000
    Monthly House Savings - $100

UTILITIES - $303 (6.5%)
    Gas/Electricity - $150
    Cable/Internet - $50
    Phone - $53
    Water - $50

FOOD - $500 (10.7%)
    Groceries - $450
    Monthly "Date Night" Restaurant Dinner- $50

TRANSPORTATION - $480 (10.3%)
    Gas - $300
    Car Insurance - $110
    Monthly Car Repair Savings - $50
    State Car Registration/Plate Renewal - $20

CLOTHING - $100 (2.1%)
     Parents - $75
     Kids - $25

MEDICAL/HEALTH - $100 (2.1%)
      Life Insurance - $50
      Monthly Medical/Prescription Savings - $50

PERSONAL - $400 (8.6%)
      Christmas - $80
      Misc - $320

RECREATION - $250 (5.4%)
      Gym Membership - $50
      Vacation - $200

DEBTS - $500 (10.7%) (DEBT FREE IN 2 YEARS!!!)
     Credit Card #1 - $50
     Credit Card #2 - $50
     Student Loan - $400

Monthly Expenses = $4,667

So in this budget, I show how you can create a balanced budget where you can be saving for retirement, paying down debt, savings for kids college, and still have room left to eat!  I'm not saying that you should be paying down debt and saving for retirement and saving for kids college all at the same time.  We'll be addressing that in later posts.  

I just wanted to show here what is possible when you plan out your money in advance.  Your situation may be different.  You may have daycare in there, you may be renting and pay much less or more for that.  So many different scenarios exist.  I just wanted to show some examples of how budgeting can free up money so that you can start to make some decisions about your family's expenses and the level of lifestyle you choose to live.  So your cable bill or phone bill may be more so you have to decide what you need to give up to afford it or can you do without it so you that you have the opportunity to do something else.  Tough questions, absolutely.  Also it shows how getting out of debt frees up tons of money that can be used in other places!  (To be discussed in a later post).

Question of the Day: 

What things do you have to do to balance your budget and start planning for 2015?

Song/Video of the Day:

Until next time............Happy Budget, Happy Life