I talk to people about saving money and budgeting daily. Whether it is someone reaching out on Twitter, Facebook, or even shooting me an email. The one thing I always hear when it comes to budgeting is just simply not knowing which budget will work for them. Budgeting doesn’t have to be a headache. Here’s the 411 on all the type of budgets and ways to know which will work for you.
When starting to budget remember K.I.S.S, which means Keep It Simple Silly. Don’t make your life harder by trying to over complicate things.
0 based budgeting
0 based budgeting is just that you want every dollar of your money to have a place and a job. The goal is to make your money work for you.
Find your “net” income. Your net income is your take home pay. Remember to include all sources income. If you’re an entrepreneur or freelancer, use your average net income for the past 3-4 months.
Write down your expenses.
- Include fixed expenses like mortgage, car payment, food, Etc. (don’t forget your debt snowball payment)
- Your bills that are a must. Like your light bill or water bill. These will fluctuate monthly, but still, must be paid.
- Variable expenses like Clothing and entertainment. If you don’t need it, cut it.
List yearly expenses like taxes and car tags.
Divide this number by 12. Each month put that amount aside so that you don’t have a large amount to pay at the end of the year.
For example, our property taxes are 200.00 a year. I divide that by 12, and each month I put back 17.00 that gives me enough at the end of the year to pay this bill without having to pay it all in one installment.
Subtract your expenses from your income. The money that is left needs a home. You do not want any money without a job in your o based budget. You can put that money towards debt, In your emergency savings, or into one of your categories. The point of a 0 based budget is to make sure all your money has a job, and an is working for you.
Stick to it! At first living on a 0 based budget is hard, because once the money is gone the money’s gone. There is no taking from other categories. Stick to your plan! Then Weekly look at your progress. Make sure you’re not overspending and look to see if there are some categories you can trim and add to your debt payments.
Google Calendar Budget
The Google Calendar budgeting is where you schedule your bills throughout the month on a calendar. Not you don’t have to use Google Calendar you could use any calendar I just use Google because I can also let my husband see it without much work.
Make a new calendar. I would suggest naming it bills or something of that nature. The name isn’t all that important as long as you know what the calendar is for.
Another thing you can do here is go in and add people you want to be able to share your calendar with. This could be your roommate, spouse, or anyone that needs to see it. Google also lets you set permissions like
- see all event (bills) details
- Make changes
- Share the calendar. I like this option because sometimes I want to show someone my calendar, but I don’t want them to be able to share it with others. This option allows me to control that.
Start adding your bills to the calendar. What I like to do is write down my bills, savings, and debt payments on paper. Then I go through and make a task for each.
I put the name of the bill, how much, and the actual due date. This way if I need to move the bill around I know when it must be paid by before it’s late.
Color code my calendar. Any bill that has been paid is green and an unpaid bill is red. Once I have paid the bill, I click on the bill on my calendar.
I then change the event color to green and in the description box I put
- Amount paid
- Date paid
- The way I paid
- If I received a confirmation number I also put it here, Just in case I need to get it quickly later on.
What is the 50/20/30 Budget?
The 50/20/30 is basically putting your money into three categories. The staples, the needs, and the wants. 50 percent of you take home pay should go to fixed expenses like a mortgage(rent), utilities, groceries, transportation. 20 percent should go to savings, debt, retirement, and your emergency fund. 30 percent should go to your bills that are personal wants like cable, clothing or eating out.
When we look at our needs most of us overspend and add things that aren’t needed, so sit down and list your bills into two categories needs VS. Wants. Everything must go into one or the other.
20 percent is a good starting point to either saving or paying down debt, but this number should depend on what you want for your future. If you want to get out of debt faster, you might need to change the percents and pay more on your debt. If you’re out of debt and ready to start building you savings, then 20 percent might be a good starting place for you.
30 percent should go to your bills that are personal wants like cable, clothing or eating out.
What type of budget you use doesn’t matter. As long as it makes your money work for you. Your situation might not fit into a mold, and that’s okay. Your financial journey is your own which means you also have to make your budget and spending plan you’re own.
How do you budget annual expenses?
Budgeting for annual expenses isn’t that hard. All you have to do is figure out how much the bill is going to be (even a ballpark figure) and then divide by 12, and then monthly you set 1/12 of the payment aside each month.
You could either put it in an envelope or in a savings account. I know some people say you can just leave it in your checking account, but I don’t like to do that because it’s easy to mix it in with your monthly bill money.
How do you budget for Christmas or other holidays?
Budgeting for the holidays can be a little tricky, but it doesn’t have to be. The first step is to come up with a reasonable number that you want to spend. Remember though cash only. If you don’t have it to spend don’t spend it.
Once you have a number in your head divide it by the number of pay periods before Christmas. Budgeted amount/ pay periods will be the amount you put aside each pay period for Christmas. The best time to start saving for Christmas is the week after, but it’s never too late to start!
How do you budget for school clothes?
Leave your questions in the comments below and I will update this post with the question and answer.