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Budgeting 101

Effective ways to manage your money

Happy couple planning their budget

Need to plan out what expenses you have every month and how your take-home pay will meet these expenses? A budget is a fundamentally important tool to have and follow.  Without some sort of budget we often find ourselves spending more money than we have coming in and that can cause some serious distress.  This becomes even more challenging when a couple is sharing a bank account.  It’s easy to get lost in what money is available and what needs to be saved for an expense. 

 

There are a number of tools out there to help you in with this.  Budgeting is something literally everyone deals with every week/month, unless you are fortunate to have an endless supply of cash coming in.  

 

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How to budget:

Step 1. 

Let’s start with basics here.  Grab a notebook/legal pad/excel workbook, whatever you are comfortable with.

  • List out our take-home monthly income.
  • If you are paid every 2 weeks then take your bi-weekly take-home paycheck you receive x 26. If you are paid twice a month, then this is easier.
  • For example: $3,000 every 2 weeks ($2,500*26=$65,000). $65,000 / 12 = $5,416.67. That is your monthly take home pay.

Step 2.

Next, let’s document all of your expenses; those that are the same every month and those that are variable. 

  • List all expenses and arrange by due date during the month
  • Break out expenses by those that are required/essential such as housing, car payment, mobile, phone, etc.
  • Discretionary expenses (dining out, entertainment, travel, etc) can be curtailed should times get tight.

Step 3.

Now you have a your net funds available after your monthly expenses.  You can see then what you have left each month.

  • Managing your monthly budget requires commitment and accountability but will pay off in the end.
  • It's important that if there are multiple people using the same funds that everyone adheres to the budget.
  • Regularly check in (weekly) on your progress. Mark or highlight items paid.
  • With your savings each paycheck be sure to be putting funds into a savings account and contributing to a retirement account.
  • Learn more about investing options here.

Budgeting Applications

While an old school paper budget or a Microsoft Excel workbook budget works fine for budgeting, there are now many more resources out there.  Have a look here: 

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