It's hard to make predictions, for example, as to what I will actually spend—or need for that matter—when it comes to food, clothes, gas for the cars, and even entertainment.
So, instead of actual budgeting, what I do instead is simply do a monthly "budget" of sorts. But there's a catch here. I also pay myself a salary based on the anticipated monthly expenses.
The first step is to know how much money you make, and have a general idea of how much money you will need to get your monthly expenses covered. Both fixed and fluctuating. Take some time to save up enough money to cover at least one month's worth of salary. This admittedly take a while depending on how much you have and what you can put away. But trust me, it is worth doing.
Here I will give you a real time example using one of my recent monthly salary/budgets just to help to illustrate what is going on here so that you can more easily apply the principles. So, first off I already have my salary saved and ready to be dispersed at the beginning of the month.
I now will write down all of my expenses, also having predetermined what my monthly spending allowance will be. This, for me, is generally a fixed number which has been arrived at based on some general knowledge of what my monthly spending on food, gas, clothes, leisure, and whatever else that is not generally a bill, looks like.
For me that number is $1,200 per month.
- Mortgage, $1,100
- Truck payment, $300
- Cable and Internet services, $189.00
- Cell phone, $67
- Water bill, $50
- Trash and sewer, $35
- Electric and gas, $103
- Spending, $1,200
From all of this I get a total of $3,149 which I will draw from whatever account I have used to generate my salary. Again, I will do this on the 1st of the month.
Now that my entire month is covered right down to spending, I will not and do not need my paychecks for anything as they come in. This is critical, because now you have to work on replenishing your salary for the next month.
As soon as you get your paychecks, don't worry so much about the amount of them, just put the entire paycheck into whatever account you are drawing salary from (hopefully it is a savings or investment account).
Ideally, if you've done things right you will at the very least put back all of the money you took for your salary. In a better scenario you have worked out your expenses well enough that you will put back more money than you drew.
If you find you are consistently matching your draw or putting back less, simply make some adjustments. Most likely your spending budget is also one of the larger parts of your monthly expenditures, so that might be the best place to start to look to make some of those adjustments.
Get out a separate pad of paper to keep track of your monthly spending. This makes this very easy to track. Keep your receipts and start subtracting every time you put gas in the car, buy groceries, eat out, or go to the movies.
Be careful to not overspend in any of the weeks before the next salary draw, especially in the first couple of weeks. Otherwise you may wind up in what I like to call the "end of the month crunch." That is, toward the end of the month as you start to run out of money you may find yourself cash strapped and may wind up resorting to using credit cards, taking out payday loans or title loans, or simply being stuck in the house not able to go anywhere or do anything.
That's a counterproductive situation as it will discourage you from wanting to continue to apply this process.
That's pretty much all there is to it. Again, ideally you are finding ways to increase your earnings and reduce your expenses so that as you go about this you are more often than not putting back more money than you are taking, which ultimately provides an opportunity to increase your income through wise saving and investing—goes into something I like call "income replacement," but that's for another day.
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