Saturday, February 23, 2013

Budget Time

We've never had an official budget. Ever. We've always just tried our best to live below our means, bank the second income, and pay off all credit cards each month. That plan has worked very well so far, but it's time to take things to the next level.

Click HERE for your copy!
(From Google Drive,
 click on the down arrow to download,
then select Open when prompted.)
2013 will be the first year that I won't receive a W2. I tutor, but that hardly brings in over $1000 a year, so we're officially transitioning to a single-income household. What does that mean for us? It means we get focused! Our goal for 2013 is to be more intentional about saving, specifically directing money toward a college and general fund for Sophia, beefing up our emergency fund, setting aside specific amounts each month for the next car, and continuing to evaluate our other investments/retirement funds. Our goal is not wealth, but a means to pass on that which God has entrusted to us financially. This goal can't be accomplished by simply running the numbers in the head.
 
Proverbs 10:4      A slack hand causes poverty, but the hand of the diligent makes rich.

This week, we sat down and discussed how to create a budget that would work best for us. I spent about an hour looking online, but nothing I found had the right FEEL. My dad is an accountant. The budgets I saw growing up (at home, with investments, and with client accounts) were maintained using paper and pencil one-writes. I LOVE one-writes. I love the extra long paper, all those crazy numbers, and the straight columns that balance forward. Excel is similar to a one-write and faster, so Brian voted for that.


I spent a few days creating, designing, and redesigning a template that we could use for 2013 and the future. It's not perfect by any means. Because of our high-deductible insurance plan, we've got an HSA to pay for all medical, dental, vision, and pharmacy fees. The HSA (pretax account) is not reflected in the budget since the budget is based off of our net (take-home) income. The medical expenses are also not reflected. The bank that manages our HSA does a beautiful job of managing all this information for us, so it would be redundant to put it on the spreadsheet. However, it might be worthwhile to track this information for others, so I've added it to the bottom of the spreadsheet.

Please use this spreadsheet as you like. Change it! Manipulate it! Make it your own! (It won't print very nicely because it's huge, but we never intended to print.) Here are a few suggestions on how to get started:

  1. Name each line item. Right now, I've made them generic (i.e., Income #1 and Trash). I find that it's easier to call things what they are (i.e., Brian's Job and Palmetto Waste) so that I can easily identify these items on my credit card or bank statements.
  2. Begin with the Income section.
  3. Look only at January (for the moment), and enter your "Budget" amounts. Since it's February, we just pulled up our bank statement and entered the total income Brian received for January into the "Budget" and "Actual" columns. He is paid bi-weekly, so typically it's just two pay periods per month. However, January has 3 pay periods, so we had to be mindful of that when entering the total income "Budget" for February, March, and so on.
  4. Complete the "Budget" columns for the entire income section. Your totals will be reflected in the "Annual" section.
  5. The "Annual" section (light yellow) is entirely based on equations. You can delete an equation (typically the sum of all "actual" or "budget" amounts for that row) and type in your own number if you like, though I would caution against it.
  6. Now pick a section you want to work on next. We skipped down to "Monthly Expenses" and completed those monthly budget columns very quickly. Those numbers typically stay the same :)
  7. "Monthly Flexible Expenses" are those that we have a bit more control over in their actual values. We tackled these next.
  8. "Annual Expenses" took a bit of research and were treated slightly differently. We didn't budget "per month" for these items. Instead, we looked up each item (i.e., Property Tax), identified what month that item would be due (i.e., June), and budgeted the amount from the previous year plus $10 in the June budget column. All of the other budget columns for that line item are $0.
  9. Now, evaluate what you can SAVE! Look at cell AC12. This cell tells you quickly what money you're supposed to have left over after subtracting all budgeted expenses from the budgeted income. We took that number, subtracted $5000 from it (because I really like to make sure I'm ALWAYS under budget), and then divided that remaining balance by 12. This gave us a goal, per month, of how much we could save. We then divvied up that per month amount into savings for Emergency, College, etc.
The hardest part is the "Budget" section! This is your GOAL line. Make it realistic, but hopeful too. For some budget items, we low-balled the number (i.e., shopping....because everyone needs to try to shop a bit less), and for other items in the savings category we budgeted more. Hopefully we'll be able to stick to our budget, but the big thing to keep in mind is that a BUDGET IS A GUIDE! Sometimes the budget needs to be a task-master when debt is an issue, I don't deny this, but take care to avoid enslavement. Thinking about a budget the wrong way prohibits you from reaching out to others who might be in need financially.

Trust God with your finances. Make wise decisions and evaluate your motives for spending in each category. Continue to give, and watch Him multiply your "mite" to use for His glory!

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