Creating a budget

[Anonymous]

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FATDUMBHAPPY wrote:

It helps to have a goal on that one.  Mine's a house down payment of $33,000 and I'm on track.

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I am a budgeting freak! I am at work on my budget managing my bills as we speak (figuratively). I get paid on the 20th and only once a month . This is sad because I look forward to payday because I spend two weeks prior to payday building up my sheet for what I consider the ideal paydown for each month.

By the way, good luck with your goal. Hope to see you on the Mortgages forum soon inquiring about getting your home. 

[Anonymous]

excel has a really handy "home budget" template. I edited this template and use it. I do one for each month and keep them all in the same budget file. then i just go tab by tab and look at the differences. I came up with my budget goals by taking the median number for all my expenses.

the only category i routinely go over is the groceries budget.

[Anonymous]

Check out

http://www.snowmintcs.com/products/budgetwin/index.php

and http://www.mvelopes.com

The first is a program that you pay a one time free $29.95 you can use it free with a nag screen and limit on number of transactions and accounts.

The other is a web based application you subscribe to , but also downloads from your bank accounts.

BOTH allow you to use old style envelop budgeting without the physical envelopes that is impractical in a electronic world.

I would like to say Mvelopes does a better job with zero balance budgting, where you decide where all you money will be spent before you spend it, it takes some trial and error to get a working budget, for a while you will have to move money around til you get a budget that works, you won't spend more than you have if you make sure your envelopes don't go negitive, if you don't have enough money in an envelope, you ethier get it from another envelope or you don't buy it.

[Anonymous]

Make it automatic! I want to share my story. After reading the “Automatic millionaire” of David Bach (great book) my husband and I have completed automated our financial life with outstanding results. We are new-weds, and before marriage we always lived paycheck by paycheck, saving zero and with a bad credit. Budgeting alone never worked for us: I believe very few people are disciplined when it comes to money. After reading the book during a weekendwe sat together to organize our financial plan we have made the following:

1) Shred our credit cards. Now we use only 1 and only for emergencies. Using our Citibank debit cards we are more aware of what we spend without incurring in debts and we accumulate 1 AA mile for every dollar spent. In just 8 months we now have one free ticket to Europe!

2) 401K: We started paying ourselves first which means saving the bucks before the government take it. We automatic saved 2% of our salary in 401k, than we went from 2% to 10% to 12%... and soon will be to15%. This is something we did with a 3 minutes phone call to our HR department, if you are self employed you can do the same through your IRA provider. The reward is a great feeling: you pay fewer taxes, have the freedom of an early retirement and build a sense of accomplishment.

3) Automatic saving plan: We realized that we were spending an average of $180 per week just of lunches and breakfast out. This is what David Bach calls “the latte factor”. Ours totaled to roughly $9000 per year, an amount that invested can became a down payment for a house. So we made the commitment to wake up earlier have breakfast together and packed most of our lunches. We also cut some other expenses such blockbuster rental videos (we now get them from free from public library), my expensive manicure & pedicures every week…and we realized we could actually save $ 2000 per month! This just reducing some daily small expenses (think of cigarettes, lattes, teas, chopstick…small expenses that when added up make the big bucks!). We opened a saving account with high interest rate (check www.bankrate.com under mma&saving) and made an automatic contribution of a $1000 every time we have a paycheck. We have managed to save for my education, and now I am actually back in school and debt free! Our next goal is pay family debts and down payment for a house.

4) Automatic Budget:Finally after the saving plan, we created 3 bank accounts (1 joint for home expenses, 1 for my husband, 1 for me). We have made an initial budget plan so that when our paychecks comes in the join account two automatic deposits are made to each personal accounts. It is weekly and using our Citibank debit cards we just spend what we have so we are never in debts and plus we accrue AA miles for our next vacation! It basically forces us to be on budget but without self discipline. The weekly amount usually includes dinner and entertainment (my husband pay for them), personal care, clothing… we know pretty much that we have $100 per dinners out so when we reach that amount, we just eat at home! Travels, car, medical and extra expenses comes from the join account but since we don’t have a card linked to that account we are never tempted to used: f we need it we have to transfer the money in one of the personal account. The Credit Card is used only for emergencies.

I hope this may help, it was seems lengthy but it does work!! (PS: read the Automatic millionaire if you can, Amazon has it used for 5 bucks. It is a life-saving book, trust me).

[Anonymous]

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Ella wrote:

2) 401K: We started paying ourselves first which means saving the bucks before the government take it. We automatic saved 2% of our salary in 401k, than we went from 2% to 10% to 12%... and soon will be to15%. This is something we did with a 3 minutes phone call to our HR department, if you are self employed you can do the same through your IRA provider. The reward is a great feeling: you pay fewer taxes, have the freedom of an early retirement and build a sense of accomplishment.

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Well Ella, it's great you have taken interest in this and the rewards will certainly be great.  I participate in an employer matched 401K.  Currently, I give 8%.  This has fluctuated over the years.  I'd like to get back to 10 and then 12%.  However, the rules have changed, and I can now go as high as 20%.  I do not think I will do so.

A guy I worked with recently retired, and had plans selling the house and buying a huge motorhome.  That's when he found out you cannot simply cash in your sheltered retirement without taking a huge tax hit.  I don't quite remember, but I think the withdrawl of 10% a year is the preferred way.

If someone wants to retire and then make a large capital purchase, such as a home or a small business, there are other vehicles better suited for this time of investment planning.

[Anonymous]

I agree. Believe it or not I can contribute up to 80% of my salary to my 401k plan.  Definately not in position to do it .....

[haulingthescoreup]

I'm in major catch-up mode for retirement, which is why I now work two jobs. (I was at home with my kids for many years.) I had been contributing around 14% at work, and in August, I switched to the maximum withholding. So since then, on my $46K+ salary from my primary job, I have been taking home * $248.50 * every two weeks. That was pretty entertaining! And on top of that, I have been funding a Roth IRA.

Thank goodness, with the next paycheck, the retirement withholding will be spread out over the entire year, so the paycheck will be a little more normal, but I will still be working two jobs for the foreseeable future.

I know that money's tight for everyone, especially when paying off debt and saving for mortgage down payments, but believe me, if you can't afford it now, you REALLY can't afford it later! You don't want to hit age 53 and work 65 - 70 hours a week, like, ahem, someone I know.

[Anonymous]

Hi Hauling,

I wish I had contributed more in my 20's and early 30's.  I am single (no kids) therefore 1 salary household. I am contributing 10% now and will increase this in 2008.

My employer matches $0.35/$1 so this helps as well.

It's great that you were able to stay home with your children.  Unfortunately a lot of us are having to play the "catch up" game"

[haulingthescoreup]

Yes, and really in this case, I can't say "if only I'd known then." We lived on one paycheck, once a month, and the money for a spousal IRA and all really just wasn't there. I just tell everyone that I invested in my kids instead of in the market! I'm happy with what we were able to do.

Now that I'm working, I'm fortunate that I can invest in the federal government TSP program, and I've weathered the last year pretty well. My second job has a terrible retirement program, so I just withhold enough to get the matching employer contribution and put it in a fund that isn't really covered by my TSP. The Roth is in a GNMA fund, which has hung in there nicely through the whole sub-prime mess. So far, so good!

I know what you mean about supposedly being able to put aside $80K a year. It reminds me of when we were mortgage shopping, and we were told that we would qualify for some astronomical figure. We just snorted and said, thanks, but the $801 per month fits our own guidelines a little better!

[WhirledPeasPlease]

I adjusted an excel template to use as a budget.  I have 4 months planned out on each worksheet.  In the left column I have the people I owe..  EVERYBODY I owe... broken down into home, CCs, utilities, car, and misc .  Next to the name of each I have the due date (or as close to regular due date as possible -- when in doubt I go with the earliest calendar date they've ever given me).  Each name is hyperlinked to go directly to the pay site for online transactions.  I love this because I never have to leave my spreadsheet to find a link.  Across the top of the spreadsheet I have the dates I get paid from both jobs and the amounts.  My teaching job has a fixed paycheck (for the most part) and my pt job fluctuates, so I always lowball that amount.  Each time I set up a sheet I enter the dates each debt is to be paid.  When I pay it I make it  bold, when the money clears my checking acct I make it italicized.  I know it sounds like work, but there are no missed payments this way and logically I just spend about 30 minutes the day I get paid and clear out everything that is due before my next pay date.  I include quarterly, annual, semi-annual and random payments as well.  At the bottom of the spreadsheet I know how much I have for things like gas, groceries, entertainment, etc.

I set up a lot of my accounts to debit automatically.  This really helps me because I have those in bold and know that I don't need to worry about them.  (Except to make sure the money is there -- which was rarely my problem, my problem was remembering to PAY and PAY on TIME.)

For each credit card I went a bit further and entered the interest rate.  This is a good motivator to see who needs to be paid off first - if you subscribe to that mindset.  I took another step and entered in how much I needed to pay each month to pay off the debt in 6, 12 or 24 months.  (There are several calculators out there that can help with this.)

This has worked for me as I'm now out of CC debt and the money I used to pay to CCs goes into savings.

Good luck!

Peas