Organizing Your Life--Budget Basics

Whether we realize it or not, we subconsciously make budgets in all areas of our life. Financially ("I can't buy that new purse, because we're saving up for a new sofa."), Time-wise ("I won't have time to do my hair this morning, we all slept in!"), even emotionally ("I don't have the energy to talk to one more person. I'm going to bed!") Why then, do we have such a hard time sticking to a financial budget that can help us organize our lives and get a better understanding of our financial state?

The answer to that question is probably different for everyone. Maybe you don't have time. Maybe you get frustrated with the bills, that you really don't want to see where your money goes. Maybe you and your spouse haven't decided who is in charge of finances, so it falls by the wayside.

Budgets are comprised largely of common sense, mixed in with a little strategy and juggling skills.

• Income>Expenses
• If your income is less than your expenses, your budget is not going to work. Period.
•  "Do What You Have To Do First, and What You Want to Do Second."
• My dad taught me this concept when I was very young. It probably applied to putting away toys before watching TV, but it works with budgeting too. 
• Divide your expenses into "Fixed Expenses", "Necessary Expenses" and "Discretionary Expenses". Always set aside the amount you need for your Fixed Expenses before you start spending on Necessary Expenses. Once both those categories are funded, you can begin to spend towards Discretionary Expenses.
• Know The Difference Between Fixed Expenses, Necessary Expenses and Discretionary Expenses
• Fixed Expenses...MUST be paid, usually with a fixed amount every month.
• Tithing
• Rent/Mortgage
• Utilities (Water, Sewer, Gas/Electric, Cable/Phone, etc)
• Taxes
• Loans or Tuition (Student Loans, Car Payments, School Tuition, etc.)
• Insurance (Car Insurance, Home Insurance, Medical Insurance, etc.)
• Necessary Expenses...Items necessary for daily life, but the cost can be re-evaluated on a monthly basis
• Groceries
• Diapers, Wipes, and Toiletries
• Gasoline 
• Incidentals (Medical Co-Pays, Broken Down Cars, Other Emergencies, etc.)
• Discretionary Expenses...Expenses that don't need to be paid, and are not necessary for living.
• Hair/Nail Appointments
• Clothing
• Toys and Games
• Dining and Entertainment

Once you divide your expenses into categories, you will be able to create a personalized budget more easily, which we will talk about next time.