Every financial expert will tell you that you should make a budget. Some even tell you how. You don't need any fancy software, although there's plenty of that out there. Start with a notebook - the same kind your 3rd grader uses or open up an Excel spreadsheet (I like this option because it will do the addition for you) and list out each of your expenses. Don't forget to add categories for spending money for you, your spouse & children - it doesn't have to be a lot but I have found that this is a key to making a budget work - everyone needs a little pocket money - something they don't have to be accountable for if they want a Starbucks or the latest paperback.
Start your list with the most important items first- things that absolutely must be paid - like your mortgage/rent. Your categories may look something like this:
- Savings (emergency & for goals like a new car or house)
- Car Payments
- Student Loans
- Spending Money (allowances)
- Credit Card Payments
- Kids' sports/activities
This is by no means a complete list; every family is different. If you have a gardener/pool guy/cleaning lady don't forget those. If you help care for a relative don't forget to list the amount of money you send them each month. Be sure to remember the quarterly expenses you may have such as life insurance. Looking through bank statements for the past 2-3 months will help you out.
We have found that having a separate checking account (if your bank offers this free with another account) for quarterly expenses helps - if you have a quarterly life insurance payment that is $300 have $100 a month automatically deposited into this account and when the bill comes due the money is there. Works fabulously! (A side note: if you have a family and don't have life insurance, please read this.)
We adjust our budget monthly. I have found no two months are exactly alike and looking at it often helps keep things in check.
I'd love to hear your thoughts on budgeting...