LWM

Building a Budget:

Last time we talked about setting up envelopes for the envelope system of budgeting, today we are going to talk about balancing your budget and try to make some sense of it.

We started by creating a budget… for many that is the most difficult step. You know how much you make each month and you do not have much control to change that figure, then you start to list your expenses and if you were anything like me you expensed far more than you showed as income. You had to go back in and reduce those numbers until you created a balanced budget.

So let’s talk a moment about how we did that. You guessed right? That’s OK, so did I! We all have to start someplace and if you have no idea how much you spent last month on gasoline or groceries or home repairs or clothing then how can you make an accurate budget?

Here is the secret… You guess! The first month is the hardest, the second gets a little easier and by the time you get six months into this you will be getting close. You will adjust numbers for several months as you get this started, you will find that you forgot important items to be added to your budget and you will find that you included stuff you could do without.

Did you read the last sentence? “you will find that you included stuff you could do without”, that was the hardest part for me. In the Dave Ramsey program he teaches that in order to live like nobody else in the future you must live like nobody else today, what he means is if you want to have more money than you can imagine in your future you need to do without some things today.

Here is a short list of things to do without: dinning out, going to the movies, Broadway shows, cruises and out of country trips, big ticket items, replacing things in your home that are not FULLY funded in your envelopes, etc.

We must take a serious look at where our money is going and reduce the spending on the things we can in order to someday have the money to live like we wish we could today. What did I give up? This list is actually a lot longer than I have space for here but some of the items included doing some of the following: I reduced by newspaper subscription from a daily to a Friday – Sunday and reduced the cost by $16 per month, I dropped HBO from my cable TV service and one of my DVRs and saved another $20 per month, I dropped my yard service and by doing it myself saved $100 per month, I bartered my pool service and saved another $100 per month, we reduced the number of meals out (goal should be ZERO) and saved another $150 per month and the list goes on.

Is it easy? No, but do you want to get out of debt and have a secure financial future? We must start by eliminating all the things from our life that we can TEMPORARILY do without so that in the future we can have ANYTHING we want.

Once we start to trim the fat we are more capable in budgeting for success. It will not be easy and members of the family will want back those things you have chosen to give up, you must remain strong and know that it is for the best of the family that you start now and start strong. You can still go out to see a movie, but create an entertainment envelope and only go to the movie when there is enough money in the envelope to pay all expenses related to that trip to the movies, if there is not enough money DO NOT GO!

Are we having fun yet? Stay tuned it will get better… I promise!

Feel free to send me a PM if you have questions or you can add them to the comments section if you feel others can benefit from the discussion.