JenPlans.com Budgeting Series – Part Three

JenPlans Budgeting 3

Welcome to the main event! It’s time to MAKE A BUDGET! If you are just starting, you’ll need to complete Part One and Part Two before moving on to this portion.

Gather your information
□ Categories (This comes from your 12-Month Spending History you completed)
□ Known Expenses (bills, debt payments, etc)
□ Known Income (if this is variable, you’ll use the variable income budget template linked below)
□ Way to keep track of budget (excel spreadsheet, pen and paper, etc)

Pick your format
□ If you have a FIXED (or mostly fixed) income, use THIS BUDGETING FORM.
□ If you have VARIABLE income, use the form above, AND THEN THIS.

Customize AND BUILD YOUR BUDGET!
Cross-check your categories with the ones on the budget form and add the ones you have that don’t appear on the forms.
Follow the prompts on each form and start filling in your KNOWN expenses first, then plan out what you’ll budget for the rest.

Don’t get discouraged!
It usually takes at least 2-3 rounds of this process while you figure out what numbers work
and what you need to adjust before they all balance out.
This is a learning process and even if it’s frustrating,
YOU ARE NOW IN CONTROL OF YOUR MONEY! And that’s SO EXCITING!

Sinking Funds! When filling in your sinking funds, you’ll divide out your expense by the number of months until its due if it has a timeframe (for example, if your $120 car registration is due next August, you’ll divide that category by 12 and then save $10 into that “sinking fund” each month. Come August, you’ll have all $120 saved, will withdraw it to pay the fee and will start all over again. If that registration is due in February, you’ll need to amortize that money over six months instead of twelve, so you’ll save $20 each month until February, THEN reduce to $10/month from then on out). If it DOESN’T have a timeframe (furniture replacement, car repair, etc), figure out how much you’d like to have saved based on your spending over the last 12 months and turn that into a monthly expense.
Be sure to note which categories have a little envelope designation next to it to show you which categories are recommended to be CASH categories. This will prevent over-spending. You can’t spend it if you don’t have it! You can use regular envelopes or make yourself fun fancy envelopes but you just withdraw the amount, stick it in the envelope and then carry the ones you need for that day. If you’re already using cash, GREAT! If you’re not, now’s the time to try.
Make your plan. When will you withdraw cash? When will you sit down to pay bills? Schedule your weekly reviews of all of your accounts and envelopes to see how everything’s going and to tweak where necessary.

If you think this is a bunch of bologna, TRY IT.
There’s no harm in trying something new. I challenge you to try it for one month –
it doesn’t have to be a lifetime commitment – just give it a shot for one month.
It will be a learning tool to teach you what you like, don’t like and how it affects your spending.
It is so important to learn about yourself in this process.

YOU’RE READY TO START! Happy Budgeting!

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JenPlans.com Budgeting Series – Part Two

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Welcome back! If you are checking in for part two in the budgeting series, read on! If you haven’t seen part one yet, start here!

Part Two is all about knowing your numbers. To properly build a complete budget, we need to know exactly where all of our money has been going. Good thing we checked shame at the door in our last part! It is NOT shameful to look at your past when you’re trying to change. It is ESSENTIAL. Take a deep breath. Most people have the hardest time with this step. I promise you – there is no hole so big you can’t get out of it. It may take some time and hard work, but ANYTHING is possible. We have to know what we’ve been doing if we want to change it. This week’s mission is getting a very precise picture of your financial situation.

There are three pieces to this puzzle: Debt, Spending, and Income

Debt
Make a list of all of your debts, smallest balance to largest balance, and interest rates.

Spending
This is the most time consuming step. A complete breakdown of the last 12 months of spending. I know it sounds overwhelming, but it took me about 2 hours altogether. You’ll have to adjust this process for the ways that you spend, but I’ll share what I did to get this picture and you can modify based on how you spend. I opened a blank excel spreadsheet (paper and pen work fine, too!) and then in my internet browser, a tab for every account I had (checking account, credit card 1, credit card 2) and then grabbed my checkbook register. I started with my least frequently used CC and went to 12 months prior, copied and pasted and then sorted out into excel by date, vendor name and amount. I added a fourth column with which credit card it was for my own reference, and then added a fifth column that I later used to categorize.

Here’s an example:

Date Vendor Amount CC Category
1/2/13 Shell $43.46 Chase Gas
1/6/13 SportsClips $22.00 Chase Health/Beauty
1/15/13 Chili’s $32.47 Chase Dining Out

I did this for every single charge for 12 months in my checking account (using my check register to supplement with check numbers) and two credit cards. It was easiest for me to alpha sort by vendor and then add a category. You’ll be able to separate by month to get your total monthly spend and also by category. You’ll know very quickly where your money went. It’s incredible and scary and empowering. Knowledge is power!

Income
Make sure you know what is income and what is reimbursement (if applicable). When you have your income listed out for each month, you can cross-check it with your monthly expenses and see how much in the hole you’ve been going (if you have been).

Homework
Homework for Week 2 is to complete all of these steps (together with your spouse/partner, if applicable)! See you next week for Part Three! I also highly recommend finding a local Financial Peace University class through this link on Dave Ramsey’s website and enrolling.

See you next week!

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JenPlans.com Budgeting Series – Part One

Budgeting Series Part One

 

DO YOU NEED HELP MAKING A BUDGET?
Join me in this JenPlans.com Budgeting Series to gain control of your finances! I’ve done this series in a few private Facebook groups but I wanted to put it on the blog (now that there IS a blog) so that anyone can have access. Part One of the series is tackling the mind game. Will you join me?

YOU’LL NEED:
1. The book Total Money Makeover by Dave Ramsey
2. Access to all of your accounts and debts
3. A way to keep track of your budget (pen and paper, spreadsheet software, etc)

There are a billion ways to do this process, and I’ve formed this series in the way that was most helpful and clear to me. General disclaimer: I’m obviously making some assumptions and that this might not exactly apply to all of you, but there should be pieces that you can take and apply to your situation. I am not a financial expert, I do not have all of the answers. My goal is just to help you take control. Let’s jump in!

This is a mind game, and you’re going to win the game. We aren’t having trouble managing our money because we can’t do math, it’s because of our mind and our behavior. I’m going to ask you to check a few things at the door as we go through this process.

Shame, guilt, and intimidation. Not all of us are here, but a lot of us are. Shame over our current situation, shame over what we may have done to get us here, shame over not pulling ourselves out sooner. Intimidation that you don’t know enough. You know what? Check it at the door. It’s hurting your financial life. I’m not discounting the feeling – it’s *very* real and it’s very impactful, which is why I want to challenge you to let go of it. It gets in the way of progress. No one became good with money overnight. No one was born with it. Just like everything else in life, we have to keep finding ways to learn about it so we get more comfortable with it and get better. Progress! To read more of my thoughts on money and shame, see this blog post.

Getting defensive. Change is tough. It means you have to own up to a lot of behavior you’d probably rather not own up to. Don’t be defensive. Don’t worry about excuses. No one is saying anyone is a bad person. There is ALWAYS more to learn, room to grow, room to get better. You don’t know everything – neither do I. Let’s commit to having the heart of a student and learning as much as we possibly can about personal finances. Owning up to the behavior that got us here is a very important part of this process.

The “keeping up” mentality. You have no idea what everyone else’s financial situation is. Let’s commit to stop paying attention to what everyone else has or gets. Commercialism is trying to teach you that you need what everyone else has – the next thing has to be yours. Consider this; if you didn’t get that thing, and then all year long you didn’t have All The Things, you’d be just fine. In fact, you’d be just fine with a bunch more money in your pocket. So take a moment, step back, and check that at the door. I’m not saying that you shouldn’t have things you want, I’m saying that you shouldn’t be driven by it. We’re going to have to reprogram ourselves to be driven by other more worthy things than Things. Many of us are trying to have the lifestyle of our parents and we aren’t really understanding that for many of them, it took them 20-30 years to get there. If you’re in debt, don’t’ have an emergency savings and retirement contributions, you cannot afford your current lifestyle. You are living beyond your means. That’s a really tough pill to swallow but it will begin your change into a financially healthy person when you acknowledge it.

Anxiety over the planning/procrastinating by planning. Um, let’s just say I’m ultra-guilty of this. If the envelopes and the budget and the notebook aren’t perfect, I might as well quit! That was me for a long time.  If I can’t figure out how to categorize my target purchase, my whole budget is out the window. That was me for a long time. I have two thoughts on this: 1, In the end, it doesn’t matter how you’re doing it as long as you’re doing it, and 2, you’ll figure it out as you go along. It’s not going to be perfect the first few times. But we’re focusing on progress, not on perfection.

SELF-REFLECTION
Now that we’ve checked things at the door and settled in, it’s time to start getting to know ourselves better. Answer these questions for yourself – ON PAPER:

  1. What’s been getting in my way?
    1. For each thing, think of TWO ways you’ll nip it. One isn’t enough sometimes.
  2. What am I willing to give up for a while so that I can accomplish my goals? What behaviors can I change?
  3. When is it going to be the hardest for me to stick with a budget? How can I push through it?
  4. What am I missing out on by not having a solid budget?
    1. Now
    2. 5 years from now
    3. 20 years from now
  5. How will I feel when I have total control over my money?
  6. How much of what I have do I really need? What are ten things around my house I no longer need? Make two columns; item and what to do with it.
  7. Why do I want to do this? Why is this so important?
  8. THE BIG QUESTION: How can I be a good steward of my money? We all have such limited resources in this life and it is a big responsibility to manage them. How can I be a good steward of what I have?

HOMEWORK FOR THE NEXT SESSION
In a few weeks, we’ll move on to the next session. You’ll need these parts completed before moving on:

  1. Read Total Money Makeover, and read it with a pen in your hand to mark up parts that speak to you. If it’s overwhelming to you, make a commitment to just get through the first five chapters.
  2. If you’re married or share finances, ask your spouse complete the above questions and talk together about your answers.
  3. Get rid of the ten things in number 6 above. You need to physically clear things out of your life for two reasons; 1, to show you that you don’t need as much as you have and 2, because when we are continually getting rid of excess, we are less driven to accumulate more.
  4. Get access to all of your accounts and debts. All login information, all balances, all interest rates, all payment information.

See you next time!

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