Living on a Budget

The first step to living on less is learning to live on a budget. Actually, no matter how much money you make, I would advise everyone to budget. I was fortunate enough to have a father that taught me at a very early age how to budget my money. I can remember when I went off to college, he gave me an allowance accompanied with a detailed Excel spreadsheet. This spreadsheet explained to me in detail the amount of money he gave me each month and where he expected me to spend it. Any more money I needed or wanted would be up to me. This spreadsheet outlined the total sum of my income and broke down the total amount into several categories; rent, utilities, groceries, gas, and so forth. I knew each month where my money should be going.  I then enhanced this budget and met with my father to ask for help with an even more detailed system of how to budget my money.  For years I lived off of a spreadsheet that broke down my income and expenditures. I kept track of my expenses. It was at times cumbersome and I did feel a little dorky, but I always knew not just how much money I had each month, but I also knew where that money was going.When it came time for me to go on a trip or buy clothing, I could look at my spreadsheet and see if I had enough set aside. If I wanted something big I would create a new category in my little spreadsheet and figure out how much money I needed to save. I never went to the ATM to check my total balance. That could have been misleading. I would go to my spreadsheet and check individual balances for each category I had set up. Basically I had a bunch of mini-accounts that I had made up to total my true bank account.  

I had a system. It worked. I graduated college, got a "real job". My system still worked. I made more money and I got a raise. My system still worked. I got another job and another raise. My system....stopped?  I'm not sure why, but it did. I guess I was making so much money, I didn't think I needed it anymore.

When I lost my job in 2007 my income was cut off. My expenses however, did not stop. For the three month I was unemployed and I had no income, I foolishly kept my expenses the same. I was living so well that I had stopped doing the thing I was taught so young. I had stopped budgeting. I kept spending even though I stopped earning.  My first lesson learned during my journey of living more and less spending, was ...

ALWAYS BUDGET - NO MATTER HOW MUCH MONEY YOU EARN, YOU CAN NEVER BE TOO PREPARED FOR THE WORST.

Today's technology has gifted us with more than just Excel to help us learn how to budget our money. There are FREE tools out there that practically do the work for you each month. All you have to do is get started.

The first thing I did when I got in my pickle was to start up my old habit. I opened my laptop, kicked up Excel and started a spreadsheet. It was title "My budget". I looked back at my past several months of expenditures and was shocked to find out where I had been spending my money. How could I have been so foolish? I had been spending as though I was still earning!  As I set up my new budget to match my new income, I found I was in for a big lifestyle change. Nevertheless, this was the first step I took to learning how to live more on less.

I will continue to post more on how to budget properly and will be happy to answer any questions you may have. Until the next post, you can go get started by pulling your records. Look at credit card statements, bank statements, and anything else you use to pay for things. Look back, very closely at where your money is going. Try to put everything into a category. See how much you are earning and how much you are spending. Add it all up. It may take some time, but I promise it's worth it. Make a choice and get back in control!

Here are some categories to get you started.

Income
 - Paycheck
 - Bonuses
 - Interest
 -Anything else (Babysitting, Rent from a roommate, dog walking)

Expenses
- Mortgage/Rent
- Utilities
-Monthly dues
- Home or Renters Insurance
-Car Payment
-Car Maintenance
-Gas
-Groceries
- Dining Out
-Entertainment
-Pets
-Clothing
-Debt (Credit Card, Student Loans)
-Vacation
-Emergency Saving (Yes you should have a category for this!)

In my next post I will give you a sample template from Excel you can use to get your started. I will also share user friendly websites that do most of the work for you. Happy Budgeting, Better Living!