January is Financial Awareness Month and a great time to make a fresh start on your budget. Everyone has a different approach to how they stick to a budget, so I’m going to discuss the different parts of my budget and how I keep track of bills and expenses.
Keeping Track of Bills, Online Accounts, and Payment Dates
We try to live a paper free lifestyle, so we set up as many bills with online statements as we have available. Since, we don’t get bills in the mail, this means I have to remember due dates and account information. I’ll admit I have a horrible memory for numbers. To solve this I do use paper. I decided it was safer for me to keep all of my account information on a piece of paper that I keep safely at home (instead of on the computer where anything can happen to it with a virus), ready to use any time I decide to go over our finances (this also allows my husband to have access to financial information if he ever needs to take over management).
How is this important piece of paper organized? Simple, with a four column system. (Tip: Use a Pencil!)
- Column 1: Bill Name and Due Date– This is where I list which bills/expenses we have and the date they are due. Some of them are listed as basic names, like “Dental Loan” or “Car”; others are listed with the proper name, like “Discover Card” or “Humana One Health Insurance”. It all depends on what I know them as, or if a specific name is shown on my bank statement.
- Column 2: Account Information – This is where I place web addresses, user IDs, passwords, phone numbers, account numbers, and pin numbers.
- Column 3: Amount Due – This column is for the amount paid. I write the exact amount if it is an automatic draft for the same amount each month, like health insurance or storage. If it is a debt, like a car payment, or something that can fluctuate with use, like a cell phone payment, I write down about $10 more than the typical amount owed, so we have enough to pay for overages, or to pay more than the minimum payment.
- Column 4: Bill/ Expense Type – This is where I list what method the bill/expense is paid. I have 3 names that can be listed in this section.
- Cash – Cash is for expenses like groceries, gas/diesel, and propane.
- Automatic – Automatic means that the bill is automatically drafted out of my bank account, like health insurance, or my cell phone bill. I don’t have to worry about remembering to pay them; I just have to remember to write it down in my bank registry.
- Online – Online is for bills that require me to schedule a payment each month. This is where Column 2 comes in handy, for login information and account numbers.
Month to Month Budgeting
Most people don’t make the same amount every single month, plus you always have to have room for emergency expenses, sickness, bad weather days, or a job loss. Because of this I have a document that is set up to show 4 months of bills/expenses. All I have listed is the information from Column 1 and Column 3, from above. This allows the amount due to change based on pay for each month. If we have extra income, we can add more to a debt or savings. If we have less income, we can remove expenses like “entertainment” or make our “groceries” or “gas” budget smaller.
With every bill/expense I schedule and write in my bank registry I mark a line through the one listed on this document. When I see the payment is verified on my bank statement, or I place the cash in my cash envelope system, I place a check mark next to it, to show completion.
The reason I chose to write down 4 months, is because I love to plan ahead. When my husband is on a job (he does pipeline work, so there can be several months between jobs) we put some of our extra income towards payments for coming months. Our goal is to always be ahead by at least two months to be prepared for times we have no income. With the 4 month system I can keep track of payments already scheduled for the current month, and see what still needs to be budgeted for months ahead.
Determining Numbers for a Budget
You know now how I follow my budget, but you need to know how I live within my means. My husband is lucky enough to work overtime, when he is on a job, but there have been many times that illness or weather has caused him to get less than 40 hours in a week. To compensate for these unfortunate times, we have our basic budget (the 4 column system) set up to account for three 40 hour work weeks and one 30 hour work week. You can make yours with however many hours you feel comfortable with, as long as they are less than what your average is. Let’s say you make $10 per hour, and you get to keep 78% of your earnings after taxes (I like to estimate high on taxes). This ($10 x 40 hours x .78 take home) would have you at $312 for every 40 hour week and ($10 x 30 x .78) $234 for a 30 hour week. Your total monthly budget would be $1170. You would use this total to create your basic budget. Everything you list cannot have a sum greater than that amount.
If you notice your monthly expenses are higher than this amount, find ways to make all bills and expenses fit. Get a cheaper cell phone plan (many smart phones cost additional charges just to have internet access); compare car insurance to find a better plan or raise your deductible; cook more or raise your own food to lower your grocery budget; carpool, walk, or ride a bike to lower your gas budget.
If your total budget doesn’t fit into the amount that allows you to have a sick day, even after making budget cuts, but it does fit if you were to work all 40 hours per week, then hope you don’t get sick, or hope there isn’t bad weather. But you could always try to find ways to supplement your income; get a second job, sale items, talk to your boss about what you need to do to get a promotion, collect scrap metal, get a roommate, etc.
Use whatever method works for you to follow your budget; just make sure you have some way of keeping track of everything and planning for unforeseen circumstances. Excel is a great software to use for your check registry and to keep track of your month to month expenses. What are your tips for following a budget?Google+