We're FINALLY Starting a Budget! AHHHHHHHHHH!!!!!!

[QM]

DH is helping me set up spreadsheets in Excel and I have a question...

DH thinks I should go back a month or two, figure out what we've already spent and base our budget on reducing those numbers. I want to start fresh from November on and do the same thing.

What do you recommend and why?

My mind is going in circles. I'm starting to think that I don't really know what a budget is for? I probably don't because we've never really had one. Any help in this department will be appreciated.

[mauimagic]

There are people here who know a lot - and I'm not one of them - I would do both. Log in the past month to see where you've been and then keep track of this month's expenses too. What could it hurt? Now I'm going to sit back and see what othes have to say.

[dcompton]

I think you are looking at budgets in two different ways. He is thinking of a budget that tells you what you can or should do; you are thinking of it as a tool to show what you actually are doing.

I agree with Mauimagic. I would look at the last month or two and base your beginning provisional budget on that -- it is guaranteed to evolve over time. And then, while working in that framework for November track your expenses, especially the little ones that often slip under the radar. Then for December, look closely at what you have actually done and adjust it as you need to.

Your first budget won't be perfect. It may not even be close if you are budgeting for a lot of specific categories. Don't obsess or be discouraged by that. It's just the way it works.

For the present, I would just try to be sure that you stay within the total amount budgeted for the month, regardless of categories. You will be able refine the projected breakdown for individual categoress over time as you continue to track your actual spending.

Now, the experts can chime in.

[Greebo]

DH has a good idea - look back over 2 months to get an idea for what you have spent and what areas are not flexible. Utilities, gasoline, food - those tend to be relatively fixed numbers (though food will go down as you learn to be more frugal about it). Then you can focus on where you can really start to trim the fat.

It'll take you about 3 months to get to a budget that works. Do not give up hope in month one - you're going to have about 75 emergency budget meetings in November.

Hang in there - hang out here and ask lots of questions - you'll be fine.

Remember - the alternative to making and living on a budget is living out of control and ending up worse off. Small pain now - great great great rewards in the future.

[Libby]

My vote - create one for now and going forward. THEN make one for the months just passed and compare. Then adjust your ones going forward to accommodate anything you've forgotten

Just my opinion.

Oh and always factor in the fact that you've forgotten to budget for something .... it always pops up in one form or another lol

[Grainlady]

It also takes several months of working on a budget to get comfortable with it, and it's always subject to alterations. You may find one method works better than another, so be patient.

--We automatically have 1/3 of hubby's earning placed in savings/investments and we live on the other 2/3, and that's what our budget is based on.

--I don't try to guess things that are going to fluctuate from month-to-month and season-to-season (gas and electricity), I just know approximately the most we ever pay and make sure we have enough money to cover the high amounts. If your budget is tight, figure you will use close to what you did for the same time period last year, not necessarily what you used last month.

--Be sure to remember to budget for things you pay annually or bi-annually (car insurance, taxes and tags, life insurance, subscriptions, memberships/dues, etc.). Hubby gets paid every 2-weeks, so we set aside the amount needed to pay for those things each pay check, so when they are due we've already saved the money each pay day to cover them. We used to place this amount in an envelope years ago, but we make more money these days and have more "cushion" for these things in our checking account.

--Pie charts and using the computer to track spending makes me crazy... I tried to switch when I got my first computer years and years ago, but it's just seems like more work than it's worth, but if it works for you, GREAT.

I've used a simple list where I log all the bills due each month (I've created a sheet I use for this for each month and I just fill in the blanks - I keep these each year so I can easily check what happened a year ago or more...). I write how much the bills are, when they are due, and mark them when I pay them. If they are automatically paid, they are noted (*) as such on the list. I already have things posted for 2010 in the month they are due, along with the amount (if known), or a good guess if the amount isn't known.

I've used this method since I graduated from high school in 1970. I only want to handle a bill twice. Once when it comes into the house and placed in the folder for BILLS, and the next day when it's put in the mail or paid on-line. I don't like to remember "due dates", I just always pay the next day.

--We use cash only for groceries, and cash for "walking around" money (adult spending money). I use my spending money on non-food purchases. Hubby uses his for car-care (including gas and oil-changes, etc.), occasional eating out, etc. This fluctuates based on what needs to be purchased, but it's at least $50 and as much as $120 week.

--Budgets aren't just to log how much you spend, but to help you figure how much you can save. For instance, I realized it's just as easy to read our local newspaper on-line (I actually get more local news by listening to the local radio stations and check their web sites). We are currently getting the Sunday paper only, for the coupons, and if I don't clip (and use) enough coupons to pay for the Sunday-only delivery by the time it's due again, I'm going to stop the newspaper all together. It's not paying for itself.

--We don't subscribe to any magazines now that we can find so much on-line or at the public library. Magazines make expensive recycling, and even WORSE if you collect them and find they are taking up valuable storage space in your home. I donate the purchase price for a one-year subscription for the library each year, so it can be enjoyed by many.

--I have a set amount for groceries ($50/week for 2 adults) - food ONLY. That's the FIRST way to save on groceries - limited funds for them. I considered dropping it to $40/week at the first of 2009, but decided with this horrible economy to really focus on long-term emergency food storage (my 3rd layer of food storage - #1- 72-hour emergency kit, #2 - Pantry Foods, and #3 - Long-term Emergency Foods) and built up our "Seven Survival Foods", which includes large purchases of wheat and other grains/seeds/beans this year, and other long-term foods purchased in #10 cans (freeze-dried fruit/veg./meat/cheese and powdered eggs, vital wheat gluten, etc....)

I rarely spend all the money in my food budget each week, but accumulate the unspent money to make large purchases of grains/beans/seeds, a years supply of the powdered milk product we use instead of commercial milk from the store, as well as grass-fed beef from a friend. I also try to keep weekly meat purchases to no more than $10 per week, and try to stick to $2 or less per pound.

--How do you save for Christmas and other holiday expenses? Christmas (and birthdays) are funded by saving our $1-bills and putting them into a savings account once a month. Christmas is CASH ONLY, as are other gifts!!!! We never use credit cards. This particular account includes our small Emergency Fund (at least $1,000 - we also have a fully-funded 6-months of expenses account). I always save at least $500/year with $1 bills, and have saved as much as $1,000 using this simple method. I also budget $20 month for hair cuts, but I pay myself to cut my own hair. That $240 is also added to this account so it's truly saved. I also add "found money" to this account. Found money is money from a garage sale, rebates, recycling metal, monetary gifts, etc. At the end of the year, after Christmas is paid for (we have $10 gift limit in our family) and $1,000 is in place as the emergency fund, the remaining money can be used for any number of things. For us, it's generally used for giving...