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Create a Budget

This entry is part 2 of 4 in the series Creating a Budget

Create a budgetSo, you’ve read part one of this series you know why you should have a budget and how it can help you answer some fundamental questions.  If you haven’t read it; read it now.  In this article the question is “how do I create a budget?”  If you have never actually had a written budget it may feel complex. Figuring out how to create a budget can feel confusing, but it doesn’t have to be.

When I talk with people one on one I usually recommend one or two methods depending on the preference of the individual.  I will talk through both here.

Create a budget on Paper.

  1. Gather up all of your bills for the past month.
    If you don’t have them from last month then keep them when they come this month.
  2. Track every penny you spend.
    Do it in a notebook, or keep receipts of your spending or use one debit card for all spending then use the statement to actually make your budget you won’t have to guess.
  3. Put it down on paper.
    If you don’t want to create your own there are plenty of places to find budget templates.  However, searching those out may lead to more confusion so here is a simple budget template to get you started.
  4. Fill in the green spaces that apply to you and the yellow column on the right will tell you what percentage of your income you are spending on any particular category.
  5. You may not need every single line so only use what suits you.  I actually find it most useful to keep categories as broad as possible.  But, you need to do what is right for you and knowing that takes experience, so play with it.
  6. My wife and I have gone through dozens of forms of budgets in our time of trying to organize our finances.

Create a budget with Mint.

  1. Mint is a free online personal finance program. (Also available on mobile platforms)  It is owned by Intuit the same company that owns Quicken and many other programs.  They have been in the business for a long time and they are very reputable and secure.
  2. Sign up for an account on mint.com
  3. Register your primary spending accounts
  4. Mint will automatically pull in your all of your account activity and automatically categorize it for you. (Watch out they are not always accurate)
  5. Use Mints built in budgeting feature to set up the categories for your spending.  Mint will let you know how much you have left in every category.  You can even set up a alerts to let you know.

Having a budget down on paper, even digital paper is the first step in getting your personal finances under control.  There is something about actually writing things down that acts as a commitment device.  But, understand that a budget isn’t set in stone.  Month to month things may vary and you will have to account for that.  For the first few months you should keep a close eye on things and maybe make adjustments as needed.

Improve your Budget

This entry is part 3 of 4 in the series Creating a Budget
Improve your budget

Photo by hisks

Great so now you have a budget written down and you are all ready to have your spending under control.  How can you improve your budget?  Pay attention to it for starters.  The biggest mistake people make is to ignore the budget they have just put together.  It is easy to assume that everything will take care of itself now that your monster spread sheet is put together or that you have set everything up on mint.com.  But, alas, it simply isn’t that easy.

I will let you in on something, even if you used my budget template as I suggested, you forgot something on your budget.  There is a bill that will come due that wasn’t part of your initial tracking period.  That is OK.  You will just need to adjust your budget now.  Is it ok to change your budget?  If it is intentional, absolutely.  The problem arise when you simply overspend, without planning. You will need to adjust your budget several time until you have it to a good place and then you will, hopefully, get a raise or something else will change in your financial life that will require you to change or even rewrite your budget.

Understanding that your budget is a living document will help you not stress out when things come up that you require you to make adjustments.

What could I have forgotten?

  • Did you put money aside for the Holidays?  That is one of the biggest times to destroy your budget.  Save money for travel, gifts and extra workout equipment to get rid of those holiday meals meals.
  • Bills that don’t come due every month; Car insurance, homeowners insurance; subscription fees.
  • Do you have an emergency fund?  Cars need repairs, hot water tanks blow up.  If you don’t want to blow your budget you need to have money put aside for these things, they will happen.
  • It also helps to give yourself an allowance so you have some money to spend when you want something.  Leaving yourself out of the budget will lead to burnout.

What else can you do to improve your budget?

More budgeting: Biblical Stewardship

This entry is part 4 of 4 in the series Creating a Budget
More than a budget: Stewardship

Image by McGoo84

Biblical stewardship is more than a good budget, saving and giving the right amount of money.  It is about having a proper biblical relationship with money.

Our problems with money don’t begin when we spend more than we make; they begin when we forget that God must be at the center of this part of our lives.  When you have no bigger purpose for your cash than your own enjoyment, you are already in money trouble.  –Paul David Tripp, Sex and Money: Pleasures That Leave You Empty and Grace That Satisfies

I liked to say, when I was a youth pastor, “There is a non-smoking, virgin section of hell.”  My point was that being a follower of Christ is more than just not doing the wrong things, or even doing the right things.  It is easy to fall into this same trap with money.  Most people who write about the money miss this point entirely.  I wrote about money years ago and I missed this point a lot.  It is why I want to write about biblical stewardship now.  You can spend less than you make, pay off all of your debt and give the magic amount to your church and still not have God in the center of your financial life.

We each have some sinful way of looking at money; I look at money to keep me safe.  I look at money to be my functional savior and it ends up being my master.  How many of us are now working harder than we want to work to pay for things we purchased long ago or things we think we need to keep up with our neighbors.  We can easily become slaves to our desire for money.

Some people have shunned money and taken on a poverty theology some have tried to use Jesus as their personal ATM loving money more than God.  Both of these ideas are sinful and will lead us toward a sinful way of handling our money.  We need to look at money as a tool to be used and stewarded just like anything else in our lives.  Money should be used properly to the glory of God and that should be our goal as Christians.

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