As I type I’m planning out my budget step by step to give you a better understanding of how budgeting works. First, I what to tell you why you should make a budget. They allow you to have freedom and peace of mind. I have found if I don’t tell our money where to go, it goes to places I don’t necessarily want to it to go like eating out or Ninja Turtle figurines(and this was before we had kids). This was actually when we were both in and we blew money like crazy. When he went on his first deployment we decided to live on one income and this is when I truly set a budget for us. It has worked amazingly ever since.
Figure Out Your Bills
Figure out your bills that come out for the 1st and 15th paycheck. We try to set up our bills so they somewhat balance out between the two pay periods. This way, we’re not broke by the 5th and swimming in money on the 30th. The sheet below, shows spending categories in pencil are the bills we have to pay. Note that we live in base housing so know that you will have to add items like utilities and rent to yours. Also, if you have bills in a different currency, make the conversion over in dollars to your budget. Give a little extra cushion for when the currency rates go up. Then from what is leftover, you can figure out what your needs are. This is things like groceries, gas, and haircuts because …military. You can play with this somewhat; for example, I consider savings and investing a bill over groceries because I can buy cheaper brands or clip coupons to spend less at the store. Plus, love savings and investing so much. Your budget is a reflection of you and what you feel is important enough to spend money on. You might be super healthy and put quality groceries as a bill, and that’s okay. The thing to remember is you need to figure out what your true needs are and make sure you have money for those. I really want you to consider having your savings and investing in the bill or needs category. By doing this you allow yourself to have money set aside for when your tire blows out, you have to fly back to see a sick family member, helping your child get through college debt free or retiring instead of working your whole life, if you so choose. This allows you, not to rely on your credit card to pay for emergencies and have peace of mind when you don’t want work anymore (I’m talking about when you’re older, not skipping work tomorrow!)
The last category in blue, is stuff you want to do like eating at restaurants, going to the movies or dressing up like a superhero.
I think it’s important to have this money set aside for you to enjoy. You will start to feel deprived if you don’t spend at least some money how you want, while still meeting your goals. With budgeting, it allows you to enjoy that piece of chocolate cake while still making sure you eat a healthy dinner first. I have found that without a budget, you eat the whole chocolate cake and wonder where it went. Many people think of budgeting as very restrictive but honestly, it gives the freedom to spend money without thinking about if you have the money to spend. It’s already set aside! This also saves you the stress of wondering if you have enough money to pay for that milk and bread two days before payday.
So here it is with all the amounts, which are not my exact numbers but they are fairly realistic numbers for what items cost in the UK. Know that every family is different and their budget will look different too. The key thing you need to is to figure out what you take home amount is after taxes. I put this at the bottom and subtract my bills and needs from that amount. After I know what is left, I can allocate that amount to the things I want to do and $100-$200 for a cushion. I always try to leave a cushion in case things go through early or something bizarre happens. I try to never zero out an account and this cushion really helps to prevent that.
So, this is my basic outline of a budget. I still sit down every paycheck to check the bank accounts to make sure everything is getting paid how it’s supposed to and check for fraud (charges for stores you don’t go to or that is far away from you). I do a separate budget each paycheck so I can figure out how many times we plan on eating out, movies we want to see, or if we plan on taking a trip down to London. I personally like to know where every cent is going so I track these items. If you want to see want that looks like, let me know in the comments.
I hope this was helpful if you’re looking to start a budget or are thinking about it. I think it is the greatest tool to help you pursue whatever financial goals you have so please give a try!