The Butler Project

The Hard Work

Yesterday’s post was the warm up, today comes the hard work. Putting your budget on paper is difficult. Not only is it detail work that requires time, the process of putting your income and expense on paper dredges up a lot of emotions. There are two things you can do about that:
1. Keep reading this blog and find some books to help you work through the emotions of money.
2. Dive in and get to work.

Putting together a budget is not something that can be completed in one evening. Not even a long weekend, for most people. It’s going to take a good two weeks to a month to really get an accurate budget, and you will find it will still need some tinkering. That’s OK. Set aside some time to get started, and then work on it as the data becomes available.

Income

Sit down with a pencil and paper or an Excell spreadsheet and start with your income; I always list income before expenses to remind me the money needs to come in before I can spend it. Here you include your salary/wages, dividends, interest, rent, pensions, gifts, and any other income you take in. Total your income.

Expenses

To make your budget realistic, you need good data on your spending habits. Write down the categories where you spend money. Dig into your checkbook register and credit card statements and pull your expenses from there; if you have all of last year’s spending data, great. If you only have 3 months or even just 1, that’s a start. If you use a lot of cash, you’ll be looking through receipts or estimating. Be as accurate as you can be, and remember expenses that come less frequently, such as registering your car, trips to the dentist, insurance payments, and Christmas shopping. Take the next two-four weeks to keep track of every income and expense. For lists of possible expenses, scroll down on this page. Finally, total your expenses.

The Results are In

Now, hopefully your expenses are less than your income. Or, they are the same because you have already included your savings and investments in your expense categories. If you are spending more than comes in, you definitely need to start adjusting your expenses and think about increasing your income. Spending more than you make is absolutely unacceptable.

As you look at your budget, are you surprised by any categories? Did you know you spent that much on clothes or eating out? Can you believe how much you are spending on fuel or rent compared to the amount of your income? Are you saving as much as you could be?

This is where budgeting becomes so powerful! Right in front of you you can see where all your money goes each year. Do you like how those numbers look?

This is probably the part that people hate about budgets. Because the “happy/fun” things they spend their money on each day are the things that they think they “should” cut back on. If there are things, “creature comforts” perhaps, that you want to cut back on, be reasonable, know thyself, and act accordingly. Don’t cut back so drastically that you feel completely deprived and end up going on a spending spree and spending more than you would have before the budget.

It’s OK to include expenses in your budget that make you feel good. Budgeting is not about depriving yourself; it’s about using your money to give yourself the life you want, now and later.

The important thing right now is that you have your budget and you are not spending more than you are earning. as you keep learning, particularly about topics such as budgeting, investing, goals, retirement planning, saving, and making more, your budget will change as your priorities change. So get your budget on paper, and make some judgments about if your spending and earning is consistent with who you want to be.

Summary

1. Budgets are good things. Use your budget to make sure you are using your money to create the life you want to live.
2. Don’t listen to the “shoulds.” It’s your life and your money. Make it work for you.
3. Sit down and do the hard work of budgeting. This includes
recording all your income.
recording all your expenses.
making sure you are not spending more than you are bringing in.
making sure your expenses match your values and your goals in life.

Subscribe to the Butler Project's RSS Feed and get fresh content as soon as it's posted.

Related Posts:
Funding Your Life: part 1
Peace of Mind vs. Piece of the Pie
You Control the Money or The Money Controls You
Quit Wasting Your Time