If you want creativity, take a zero off your budget. If you want sustainability, take off two zeros.
First of all, I want to thank my friend Lisa Kurz for filling in today, as she, (as she rightly points out) is a nerd about this sort of thing, and is therefore much better qualified to explain this than myself. Second of all, budgeting is IMPORTANT. I learned this the hard way. Knowing that she’s amazing at this, I went to her for help…and so far, so good. So, without further ado, I shall let her speak on the subject:
A few months back I helped Cody set up his first budget ever. I nerd out a little over budgeting and think they are quite fun. Cody asked me to write down some of this budgeting process to share here, so here it goes.
Why do I need a budget?
First of all, budgets are important because the money we have is a gift we’ve been given. If you’re a Christian, you have probably heard that we are “stewards” of the money God has given us. Basically this means we should use what we have wisely. God isn’t about to entrust us with more if we are mismanaging what we already have. So there it is. Budgets are important. They help us to manage our money.
Where have I been spending my money?
If it’s your first time making a budget, you’re going to want some scrap paper. Make a list of the categories where you spend money (housing, utilities, food, clothes, car, loans, ect.). Next make your best guess as to how much money you usually spend in each of these categories in a one month time frame. If you don’t have a good guess and use a debit card often, you can check on your bank statement and make some quick calculations to this end. Find the total amount that you think you spend every month. It may be helpful to separate this out into NEEDS and WANTS at this point too- especially if you often find yourself in the red at the end of the month.
How much money should I spend?
The next step is to ask yourself how much money you have coming into the house in a one month period. Count everything (you and your spouse in the same pool after marriage, of course), even tip money. If you are self employed look at a low average month to give you a good idea. The goal of the budget is to live below your means, so if you have extra at the end of the month that is okay (we’ll get to some ideas for that in a bit). Look at your two totals. If what you have been spending is higher than what you make in a month, you are living outside of your means.
Why should I tithe?
Giving the “first fruits” of your earnings to God is as old as humanity. It’s older than Christianity, and Judaism, it dates back, biblically speaking, to the beginning of time. Before you even make your budget, take 10% (Move your decimal one place to the left. Eg. $4000 of income has a $400 tithe) and tithe it to your local church. If you don’t have a church home, give it to a mission or other program that you trust to use it wisely. Since the idea of giving back to God is pre-law (before he gave Moses the laws for the Jews) I believe that this is a non-negotiable as far as properly handling money; I believe it applies to all of creation. (ED: It does. We were created as stewards of creation. You’re Orthodox, you should know this.)
How do I actually make a budget?
Here’s the nitty gritty of budget making. List all of your expenses in order from most important to least important. I’ll give you a hint, most important includes things that you NEED:
1- Food/Groceries (not eating out)
2- Shelter (rent or mortgage, insurance)
3- Utilities (gas, electric, sewer, trash)
4- Transportation (car payment, gas, maintenance, insurance)
5- Clothing (more applicable if you have minions as they tend to wear out and outgrow their clothing)
After all of your NEEDS bills are listed, calculate the total and see if you have money left. Do you need to look into making meal plan and planning your grocery spending better? Can you switch to a new service provider for trash or electric to get a lower price? Is your car payment killing you- perhaps you should get an older car that is paid off? Answering these and similar questions that may come up are getting you started on slimming your budget.
Next comes bills that you should pay and want to pay, but life would not cease without paying them. For example:
1- Internet/Cable (I actually suggest nixing cable but that’s a different story)
2- Cell phone bill
3- Credit card payments
4- Student loan payments
Plan in your budget to pay these types of bills after your monthly NEEDS are met. The collectors will try to convince you that paying Sallie Mae or Visa are NEEDS, but these things do not trump caring for your physical needs first. If you don’t have enough money to cover these types of bills think about making cuts and call to see if you can get onto a different payment plan. Plan on paying off all of your debts as soon as possible. You can become a giver and help more people if you are putting less of your money into debts and payments.
The last (ish) thing you will want to put into your budget is things that cost money that you WANT. The end goal is to make your INCOME and your “OUTFLOW” equal. If you did this subtraction problem it would come out to zero: Income-Outflow=$0.00. Things that you want may include:
1-Dining out once a week
2- Short term savings (sinking funds*)
3- Long term savings/Retirement investments
4- New clothes/shoes ect.
5- Vacation money
6- Gift money
You may have noticed that even though your budget will balance to zero, you are not actually spending every time you make. With this last area of the budget, you will be putting some money aside for future purchases. It’s also a good idea on your first budget to set aside $50-$100 for a “slush fund” in case you have any miscalculations. I mentioned about a sinking fund. This is when you are saving up for a bigger purchase. For example I might need to replace some furniture in my house; I will designate $50 a month to a sinking fund called “furniture”. After 4 months I will have $200 set aside for furniture. Then I may go and get a $150 office chair. I will use up some of my sinking fund and it “sinks” down to a balance of $50. The next month I can continue adding to this fund to replace the next piece of furniture on my list. Sinking funds are also helpful for quarterly or biannual bills. Divide the total bill by the number of months until the next one comes; this amount is what you should put into a sinking fund each month until the bill arrives. Then you use the sinking fund to pay the bill.
So there you have it; your first budget. The last important thing to know is: you should make a NEW budget every single month. Expenses change, gas prices go up, school field trips or business trips eat some of your cash- all of these things that happen “sometimes” can be anticipated by making a new budget that is individualized for every month. I need a lot of gift money in May and December, but not as much in other months. This is taken care of by making a different budget for each month. I can allocate my money differently based on the season and the needs of the moment.
(Ed: this goes without saying, but if you’re dating, you need to budget for it.)
And there you have it, fellow Orthogents!