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Did you know that over 60% of Americans do not use a budget? This means that almost 60%, if not more, are spending more than they need. This begins us to our topic today. The BIGGEST way to reach your financial goals is by using your budget effectively. If you missed out on “how to create a budget” be sure to check that out first.
Before jumping into this budget thing, think back to STEP 1 when we talked about sacrifices. If you missed it or need a refresher be sure to check it out first before continuing. The post will help you in using your budget. Don’t worry I will wait right here for you!
You are here today because you have this goal and to make that goal happen you need to budget your money better. There are so many ways to do this and I wanted to share what has worked for me. And hopefully it will work for you too! I have been budgeting with this type of system for over 6 years. I have adjusted it over the years but this design has stuck for over the past 4 years. Here is what my spreadsheet looks like.
But what good is it of me just showing a picture of the spreadsheet? How about I save you some time and just give you your own copy? Please note that this file is for personal use ONLY.
Find your own copy in the FREE resource library but you will need to be a subscriber to access the file!
Now that you have downloaded the file, how about we talk about using a budget?
ENTER INCOME & EXPENSES – PLUS TRIM YOUR BUDGET
In the post “creating a budget“, I had you really think about all the income coming into your life and all the expenses coming out. Now it’s time to put those amounts in a budget.
SIDE NOTE: I have created a video on how to use the budget spreadsheet; you can find the link on the spreadsheet or at the bottom of this post!
What I want you to do now is input your income and all your expenses into the spreadsheet, ONLY add it to the budget tab! You can change the name of an item in a category but only change it in the budget tab.
Once you have named and added everything, look to see how much cash you have at the end. Do you have extra? Or are you in the negative? If you are in the negative side, it’s time to start looking at those expenses and deciding which ones you will be sacrificing.
If you have extra cash at the end, you are not off the hook. I want you to look and see what you can sacrifice also. Remember you are here because you have a GOAL and if you really, REALLY want that goal you will have to sacrifice! Here are some ways to do just that.
LOOK FOR A LESS EXPENSIVE OPTION –
Maybe it’s time to find a cheaper phone plan? I did this 2 years ago and I am not looking back! I pay less than $15 a month for my phone. YES I pay less than $15 for a Smartphone. If you are wondering how, it’s called Republic Wireless and it could maybe work for you too.
Another thing I did was change my insurance and this saved us hundreds a year. Go see Dave Ramsey’s website to get a better rate.
A big thing we do is shop around for the best price; we do this with our internet. But sometimes it could just take a phone call to whoever you are using and see if they have a better plan!
LOSE IT –
Another thing to look at is if you use the expense? If you do not use it often then lose it. Get rid of that expense!
We do NOT have a cable plan. That’s right, no cable! We have a little antenna, that cost less than $60 (over 3 years ago), and we now watch local channels (ABC, NBC, CBS, FOX, PBS, etc…) for FREE. Who does not love something for free? But let me tell you this was hard at first, not having those other channels, but now I would never go back. We watch a lot less TV and spend more time doing other things!
LOOK AT PERCENTAGES –
Start looking at the percentages next to the total expenses (under each category). Did you know that there is a suggested percentage for these? Here they are.
OK if you are spending less, great job! But what if that percentage is higher? Maybe it’s time to change the expenses inside the category. Cut something out or maybe you need to down size. You may be saying that some locations cost more to live and I know this, so please take that into account.
Now when I saw some of these percentages, I thought how could I spend that much on that one category? So another way to look at percentages is by the 50/30/20 rule.
PLAN AHEAD –
This one is something we talked about in creating a budget and it is so important that I am going to talk about it again. Why is it so important? Well let’s say you don’t plan on saving for Christmas at the start/middle of the year. Then December rolls around and you need to buy gifts but they are not in the budget, making you over spend which goes onto the credit cards. Now credit cards can be good things but only when you can pay off the amount that month!
So plan ahead on yearly expenses; some examples are: Christmas, birthdays, clothes, car maintenance, car registration, taxes, insurance, etc… Please save yourself the stress and plan ahead for these expenses now!
INCREASE YOUR INCOME –
Do you want to see more money in your budget? Well you need to increase your income. This can be done by getting a raise at your current job or getting a side job. Something I want to note about doing this. This increased money should be applied only to achieve your GOAL. It should not be used for the little wants but the BIG GOAL; maybe it’s paying off your debts or saving more!
USE CASH –
In our world today, it is very easy to put everything on a card. But I want you to be different and use cash for some things. The main, if only thing to use cash for, is your food budget. This is the easiest way to see where you are at with your budget. And once the funds are gone, you DON’T get more until the next month!
HOW TO USE A BUDGET
Now that you have trimmed your budget, let’s start using it.
Here is how I do it. Every month I enter each expense as it happens in the “Year” tab. (I do copy the tab and name it for that year) I also take out cash for my food and house projects. This way I do not over spend on those expenses. At the end of every month, there is a total remaining balance if this amount is showing extra (this is good) this amount is then used for my GOAL, it means you under budgeted for the month!! If the amount is negative, you over spent and need to find the addition money somewhere.
TIP: You can hide columns to make it easier to see everything.
If you happen to make more money then you planned on for that month. There is a tab called “EXTRA PAY” and you would put that amount there.
If you choose to use credit cards to pay for your expenses, I have a form to help you pay them off also (because you should only use them if you can pay them off every month). It’s located at the far right of the workbook.
There is another tab in the budget spreadsheet called “Plan Ahead“. This is for a savings account (you could use different bank accounts for each but some banks will make you pay for this). Every month, I transfer the amount I have budgeted for each category and write it inside the spreadsheet. Looks like this.
When the expense happens, I use my credit card to pay for it (unless they give me a discount for cash) and then I transfer the money from savings to checking. And pay off the card, making sure to write it into the spreadsheet.
If you are confused after reading, please please please watch the video on how to use the Budget Workbook!
I AM USING A BUDGET, NOW WHAT?
I really hope this helps your money work for you, instead of you working for it. Budgeting can be hard but it is very rewarding. The first couple of months are always the hardest but after about 3 months you will see the rewards. You will feel the control you have over your money, not the other way around. Please take this step of using a budget very serious and use the budget every month. It’s key to helping your dreams come TRUE!!
Now that you have a budget and are using it, you can move onto creating a Rainy Day Fund.
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