A Basic Budget for a Busy Body

The word “budget” can be like nails on a chalkboard for some people. The idea of sitting down to balance a checkbook or even determine how much you should spent is detestable by most people. I personally enjoy budgeting, but only when I have money to budget. In others words, when I don’t have much, I don’t enjoy logging-on to my online banking and staring at very small numbers. I’d venture to say that most people feel the same way.

That said, we’ve got it completely backwards. While budgeting when you have money is great, avoiding a budget when you don’t is precisely the opposite of what you should be doing. The less money you have, the further you have to stretch it and the more attention you should pay to budgeting it. We humans do funny things sometimes.

In response to the world’s distaste toward budgeting, I thought I’d outline a very simple, three-step budgeting process that won’t leave you breathless, upset, tired, disturbed, bothered, agitated, confused, distressed, frantic, grieved, worried, deranged, disarrayed, disturbed, afflicted, bewildered, or dead. And that’s a promise.

To be clear, a monthly budget is most accessible and easily managed. The following steps are based on a monthly schedule:

1. Count your Dough. Step number one is to figure out how much money your making every month. For most this will be simple to determine based on your monthly paycheck while others may need to make an estimate. The key here, is to determine your after-tax income. If you use pre-tax income, your budget won’t be accurate and you will be very disappointed at the end of the month.

2. Whatcha’ Buying. Step number two is to determine how much money your spending every month. Most people have fixed expenses that they incur every month like rent, a mortgage payment, utilities, a car payment, cellphone and cable bills. Secondly, variable expenses are those that change every month, things like groceries, entertainment, gas, and eating out. I suggest you look at last’s months expenditures to determine how much your approximate variable expenses will be. Lastly, surprise expenses are those that do exactly that, surprise you. This includes things like car problems, replacing a broken refrigerator, or taking your kid to the doctor. This category may be difficult to estimate but think for a moment about the past three or four months and consider the amount of any surprise expenses you incurred. Remember, always round-up, not down.

3. Grab a Calculator. Step three is to simply subtract your expenses from your income in order to see if the remaining number is positive or negative. For those who end-up with a positive number, congratulations. While you are not breaking the golden rule — never spend more than you make — consider stashing that remaining amount under your bed, not into your pocket to be spent on things you don’t need. For those of you who end-up with a negative number, you have a few decisions to make. You should never spend more than you make. So if you find that indeed you are, there are two ways to fix the problem: 1) decrease your expenses and 2) increase your income. We highly recommend you go with option one because it is the short-term solution. Sit down and shave-off some zeros from that “entertainment” or “eating out” category. While you may find this difficult, it is absolutely necessary.

I’m confident that by following these three simple steps, you will find you have tremendously increased your control over what you spend and how you spend it. Remember, breaking the golden rule — never spend more than you make — will only get into credit card trouble. Trust me, I know.