Why Budgeting Matters
I wrote this blog post in 2013 on my blogspot site about budgeting before I became the woman I am today. This was at the beginning of my money journey but after reading this post I realized a lot of this information is still very helpful so I wanted to share it.
What’s with a budget anyway?
Budgets are for everyone and the kind of budget you use is important. I only found this out after going to FPU or Dave Ramsey’s Financial Peace University. I have been using a budget since I was 18. At the age of 18 I lived in my first place (alone). No one had ever explained money to me.
I can recall asking the adults around me for financial advice at the age of 18. I quickly realized that everyone around me including my parents was bad at managing money. I didn’t understand how or why you had to manage money but now I do.
Yes, like many people I have lots of debt but unlike most I’m on a plan to be debt free. I want to be debt free for my son. Take a minute and think about what you would do if you were debt free. I will wait. My budget is a big part of my plan.
“Why?” you ask. Because it helps me see, track, and pay attention to where my money is going. It gives me power and control. Having a budget saves me money.
“How?” you ask. Well, it’s easy. I pay less bills late. I have fewer overdrafts, and fewer payment (convenience) fees. By not paying bills late I save on that late fee businesses love to charge. These fees can be up to $30 or $40 depending on the type of bill. The banks have to get their cut of course. Forgetting you purchased a $1 soda pop on a debit can cost you up to $40.
And last but not least, technology has made it easy to wire, pay by phone, or pay online however many businesses charge a small fee for that service. Not paying this small fee may be your biggest savings yet, depending on the bill. Let’s say your mortgage company charge an $8 payment fee each month. That is $96 a yearly or a total of $2880 over the course of 30 year’s. If you plan better, you can mail the payments on time and save money.
So what’s a good budget?
The zero based budget is the best one I have used for two reasons. Usually the stuff you don’t put in your budget (gas, fast-food and entertainment is what’s eating up all your money).
The zero based budget included everythings. Not just bills, but your clothes, oil changes, entertainment, insurance, and fun money. Fun money is that cash in your pocket just in case you see the “It”. Whatever the “It” is. When you don’t feel guilty the next day for buying something that is where your freedom comes from.
How do you do a zero based budget?
First start by doing the budget for the next month so if it’s October do the budget for November in October. On the last week of the month do your budget for the next month. By this time your usually have all your bills for the following month (light, water, cable, etc.).
It’s easiest if you write all your expenses out. At the top of the page write your total take home income for the month. Put your expenses in order from most important and automatic withdraw first and just keep going. Put a dollar amount by each item and subtract that amount from your income total at the top.
Once you get to zero you are done. If there are still bills left they either don’t get paid or you can change the amounts on some of the other bills. Below is a zero based budget form and example sheet you can use.
Try it out and let me know if it helps you get your finances in order.
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