1) Make a general budget.
1a) Take out the list of all expenses
1b) Next to each recurring/fixed expense write down the monthly price. This is the money that you have promised to pay or owe each month (cell phone, mortgage/rent, cable--anything you get a bill for)
1c) Calculate how much you have left.
1d) This is the tough part...figure out what's the least you can reasonably spend on your variable line items. (food, gas, etc) Write that down.
1e) Write down the rest between your paying down debt or savings goals.
2) Review the budget
2a) Look at your savings and debt payments...are they high enough to reach your goals--and be honest, both in how much you can put towards it and how close it is. This needs to be accurate because we are going to remove that amount from our accounts and put it towards their goals BEFORE we pay for anything else. This is paying ourselves first.
2b) If it's not close enough, which it never is, right :), you need to look at ways to save on your variable expenses (for example, eat out less) and to lower your fixed expenses (get rid of cable). This is the step that Stage Orange revolves around.
Each month on First Friday Financial we will go over our general budget and make adjustments for the upcoming month--typically minor. This may include action plans to lower our fixed expenses or ways to save on our variable ones. We will also look at the previous month's budget and see how we got. I will also update my networthIQ graph at the time.
We gave ourselves some variable spending cash as a compromise between P and me. I'm not sure how it will work out or what we get to do if we go over/under . The decor fund should only last a few months--probably until Thanksgiving when it will turn into our Christmas budget. The "Other" line item is there to make the balance come to equal and in case we mess up by a little bit.
P gets paid twice a month. I get paid every other week. We know how much P makes after his 401(k) and our health insurance comes out. I had to guess how much I will have after taxes, but I think it's pretty close. I assumed two paychecks a month for each of us and put the post tax at the bottom. In March and October I will have an extra paycheck and we will put that towards retirement in an IRA. That's not shown in this budget. Also, in two months I'll start having 401(k) coming out. I'll take away the retirement line item at that time.
Hopefully we can stick to it!
|Mortgage Over ||1240|
|Yacht Club (Dues, Events, and Food)||200|
|Day Food L||100|
|Day Food P||100|