Tuesday, March 10, 2015

Budgeting for Life

Budgets are important, especially for those of us who love to travel. Methods of budgeted vary from family to family, situation to situation. Several years ago a friend of mine was in financial straights. Her family was hemorrhaging money and she didn't know how to stop. I asked her about her budget. Not only did she not have a budget, she didn't know what or how to budget. She is a well educated professional woman! We spent the better part of the day discussing methods of budgeting, and later led to a tough conversation between her and her husband. 

I have used a few different budgeting methods over the years. The most important thing is finding what works for you.

The Envelope System:
I was first introduced to the envelope system years ago on a blog, sadly I can't quite remember whose blog. She had posted links to cash envelopes on Etsy. You divide your income up between different envelopes, each envelope is a different part of your budget (Insurance, Rent, Groceries, Gas) once the money in that particular envelope is gone, that is it, no stealing from other envelopes.

Last Months Money Budget
This budget requires you to plan ahead. This probably isn't a budget you can jump into straight away. You save your monthly income, and from that you build your budget for the next month. You live off of whatever you took in from the previous month. No borrowing from incoming funds, those get saved to be used for the following months budget. 

Spread Sheet
This works best for those who know exactly how much they bring in every month. Using either budgeting software, Excel or pen and paper break down your spending into categories with an estimate of how much you spend in each category. Its best to be a bit generous with your estimation and plan for the unexpected.

Its important to have a grasp on how much you bring in, and how much you spend in a month. Some categories are more important than others. Budget your mandatory expenses first, mortgage/rent, utilities, groceries, transportation. After you have budgeted your mandatory expenses you can plan how you will spend your left over discretionary funds. Plan and spend well with an eye toward the future.