Friday, February 8, 2013

Household Budget Step 2, 3 to Finish

This took me much longer than I expected. I wanted to use the spreadsheet on my own first and then of course the challenges of sharing it on the Internet. Which I actually worked well before I figured out it worked. You can click here Budget Spreadsheets  and download the excel files to your computer you should be able to input your numbers and budget away. You can find detailed instructions at Budget Spreadsheet Instructionsthat you can download or print.

Remember I am just sharing what I use that works in our house, no professional knowledge just real life use and Excel spreadsheets. This budget worksheet has developed over time, it wasn’t always color coordinated, and I actually just did that to be more “user” friendly. No claim to perfection so if you use them and find something doesn’t work PLEASE let me know! I use it to set my budget once a year because I found that once a month did not get done at our house. If you are disciplined on budgeting monthly you could use it that way too.

There are a couple things I will point out, that I think are key to being successful in budgeting.

ELIMINATE DEBT: It is important to have as little debt as you can. If you have a lot of debt I would encourage you to read “The Total Money Makeover” by Dave Ramsey or go to his website. His book is what really got me budgeting.

USE CASH: I tried using my debit card but there is something about knowing you only have $150 in your wallet to pay for groceries that keeps me from throwing that extra item in the cart.

I also like to keep a little stash of cash for things come up, because they do, or sometimes one week groceries are a tad more but the next they are less. As you borrow from it replace it as quickly as you can (maybe $25/week out of the grocery budget).

I like to have about half a month to 1 month of what my cash budget is stored up. It is important to build this stash to start out, even if it means really skimping for a month otherwise you will resorting to the credit card. I built it up by cutting my grocery budget a lot for one month using up things in the back of the cupboard, cooking from scratch and just enduring the complaints about having nothing good to eat in the house which normally means there are no pop tarts. It is easier for me to suffer short term on things like this than have it hanging over my head for months.

SKIP THE CREDIT CARDS: If possible do not use them. I cheat a little bit. I get cash back on my cards so I use them for auto pay on a couple bills and items that will be paid out of escrow. I use it for items I budget so I know the money is there to pay it off every month. IF you cannot be sure to pay it off each month don’t even give yourself this flexibility.

EMERGENCY ACCOUNT: If you do not have an emergency account saved you should include building one in your budget. The recommendation is 3-6months income, 6 if you are a one income family. Even though it took a bit to build it up, it is nice to know if we need it the money is there. Keep this money separate from other savings, but accessible if you need it. We keep ours in a money market account. When you have money set aside you are not thrown off budget when your wash machine breaks down and you need a new one.

ESCROW ACCOUNT: This is not a special kind of account just a regular savings account at your bank. I just use the term “escrow” because it is a familiar term to most people who have a mortgage. This is an account that you set aside money out of every paycheck to pay for spending that occurs less frequently. This is actually my “Thing that works well” I am sharing this week. Having an escrow account has helped me a lot in our budget. I always worried about if I would have the right amount of money at the right time for larger bills I didn’t pay monthly. If you are going to budget using these spreadsheets and monthly averages, an Escrow Account can really help. You CANNOT use this money for other items only for what they are designated.

There are two reasons I use a different account to store this money. When it is in your checking account it’s too easy to spend. You think you have extra money because your balance is high, but then car insurance is due. The extra money was spent last month on new clothes, so now you have to figure out where it is coming from. If you keep the money separate and designate what it is for through budgeting when that bill comes along, you transfer the money and pay it! Second why keep all that money in your checking if you could earn more interest with it in savings (Not a huge difference right now, but hopefully there will come a time again that you earn more than 0.3% interest on your money)

In the Budget Spreadsheet Instructions  page 6, there is more information on starting and using the account.  

The following are the items are categories I use our escrow account for: Some donations, Propane, Trash, Meat (we get our beef in bulk), Car Repairs and Maintenance, Car Insurance, License Plates, Property Taxes, Doctor, Dentist, School Fees, Travel, Gifts (Birthday/Christmas) and Kids activities.

It may seem silly because some may be a minimal amount when divided out of your weekly paycheck, but when they are added all together you’ll be amazed how much money it adds up to be.

Well that is enough on budgeting for now. If you haven’t already, take a look and don’t hesitate to email or comment with any questions or problems you have using the spreadsheets. It looks more complex than it is.

Good Luck and happy Budgeting.
Budget Spreadsheets
Budget Spreadsheet Instructions

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