The word budget feels like a four letter word to some. Just the thought of going through expenses and figuring out how get them all organized is overwhelming. Then there’s all the time involved. Most of us don’t have time to eat a proper lunch, much less figure out a budget.
Or maybe the idea of a budget seems too rigid and constraining. The free spirit doesn’t want any hard rules about spending money. But everyone needs a budget. Even the free spirit will find her wings quickly clipped when she runs out of cash.
In truth, a spending plan doesn’t restrict you. When managed properly it sets you free to live the life you want. And it doesn’t have to be time consuming. Here’s a spending plan that can work for everyone.
Simple Budget Spreadsheet
All you need for a budget is a simple spreadsheet. You can use Excel, Open Office or Google Docs. To help you along, here is a simple Google Docs Budget Spreadsheet. What you will do is open the spreadsheet and save it to your own computer by clicking “File” and choosing the download option that works best for you. Once you save it to your own computer, you are ready to go.
Enter the amount of income in the appropriate box, including all your jobs, side jobs, etc. Enter any interest you earn on accounts or investments in the next line. The spreadsheet will total the income for you automatically.
The next section will be for your recurring expenses. List each expense following the example of the spreadsheet. Include rent or mortgage, utilities, cable bill, loan payments, kids’ expenses, etc. If you like, break the expenses down into categories that make sense for you.
Now you need to estimate what your other expenses might be. Things that change month by month, such as groceries, entertainment, etc. Estimate on the high end. If you find them going down over time, you can lower your estimates. Again, the spreadsheet will total it up for you.
How Much Should Your Expenses Be?
The spreadsheet will also calculate the percentage of your expenses compared with your income. The idea is to keep pecking away at your expenses until your expenses fall below 60% of your income.
The other 40% should be divided into four categories: 10% for retirement, 10% for long-term savings (retirement), 10% for short-term savings (emergency expenses). The last 10% is all yours to do with as you please. Ideally, you would use that to pay down your credit until you have no monthly credit card bills. Now was that so hard?
Controlling Your Cash
If you don’t trust yourself to stay within your budget, you could try a cash filing system. A recipe box and index cards work well for this one. Divide the recipe box into 31 days with the index cards, each label with the day of the month. Then divide you remaining cash into each portion of the 31 day file. Let’s say that you have 30 dollars for each divider. At the beginning of the day, you remove the 30 dollars. That is what you have available to spend on that day. Do not take money from another divider until that day has arrived. If you have left over money at the end of the day, put it behind the next day’s index card for tomorrow. For this to work, you must never take from the next day.
This gives you the feeling of freedom by always putting cash in your pocket. If you put the day’s leftover at the end of the month each time, you’ll see firsthand how much you have to spend towards something special at the end of the month. You can leave the money there or spend it as you please.
Jessica Bosari writes for the money-saving site, Billeater.com. The site is devoted to helping people reduce expenses, save money and find great deals. Pay Billeater a visit for more budgeting and saving tips!