How to Make a Budget

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The most important thing we did when deciding to get out of debt and take over our finances was to make a budget. Right after making a list of all of our debts and posting it up in a central location, looking at it every day and marinating on it for a while. Now that we’ve had an updated, working budget, I have no idea how we were functioning (or trying to) without one.

If you want to get out of debt and have savings goals, you. Need. A. Budget. No lie. No way around it.

But when we were first starting out, actually MAKING one was the hardest part. This isn’t a skill taught in school anymore, and judging by, not only my personal experience, but the recent report from the Federal Reserve that states that Americans now carry more credit card debt than ever, even before the Recession of 2009, people are not seeing responsible financial behavior modeled in their homes or other relationships. What do you actually do? Pen to paper, what do I need?

  1. Gather your bills, receipts and pay stubs for 3-4 months. As with anything, you have to start with a good foundation. Income and bills can fluctuate, especially utilities and grocery spending, or income if you’re an hourly employee like myself. The rest of your budget is based on what you observe yourself bringing in and spending, so those numbers need to be accurate, and one month’s worth of info isn’t going to cut it. Grab 3-4 months worth to start.
  2. Figure out your monthly take-home pay. Whether you get paid monthly, weekly or bi-weekly, total up all of your paychecks for each of 3 months and get your total income for each month. Then add them all together and divide by 3 (or 4 if you’re using 4 months of data). This gives you your average monthly income. If you are self employed or have an otherwise irregular income, read Dave Ramsey’s guide here, on how to make a budget with irregular income. (This is the fun part where you say “Yay! Look at the money I make!”)
  3. Figure out your monthly expenses. This part takes some work, especially in regards to the time you put into it. To track your spending monthly, get all your bills together for one month. This is just going to help you create categories for your budget, and you’ll be surprised at how many there are when they’re all out there on the table. Don’t forget to track things like groceries and housewares. There is a worksheet here from consumer.gov for a visual aide.
    Then, get the bills from the other two or three months you’re using for your baseline data to make your budget, add the number for each category and divide by how many months. Example, for category Electric Bill, go back and find your electric bills from May, June and July (if those are the months you’re referencing), add them together and divide by 3 to give you your average expected electric bill.

    Tip: For utilities that fluctuate throughout the year, such as oil in the winter or electric in the summer when AC’s are running, use the months where these numbers are highest to create your budget to avoid running over your budget for an entire season. You might not spend all of the money allowed for your oil budget in August, but you’ll be thankful for the cushion come February. If you are running a tighter budget and aggressively paying off debts and not keeping a big cushion in your utilities account, redo your budget every few months using current or more relevant data and make your adjustments accordingly.

    The most important expense to include in your list here are your savings goals. These can include your starter emergency fund of $1,000 if you’re doing the Baby Steps, Christmas gifts, or medical bills that are upcoming. As Dave Ramsey says, “Pay yourself first.” After all, a budget is how you tell your money where to go to avoid wondering where it went (another Dave-ism), and every singe dollar of your income needs a purpose.

  4. Figure out the difference between the two. Very easy step but a very difficult one. Total up all of your monthly expenses (including your savings goals that we described earlier as a necessary expense). Then subtract that number from your total monthly income.
    Take a deep breath.
    Is that number positive? Then woo hoo!! Nice job, you make more money than you spend. You have met all your monthly expense requirements and savings goals and have money left over to service your debts.
    Is it negative? You then are in the majority of people who spend more money than they make. Proceed to step number 5.
  5. Make adjustments. If you spend more than you make, you will need to make adjustments to your budget. You can’t keep on running deeper and deeper into the red every month. You’re not Congress after all.
    Look back over each category of your monthly expenses. What surprised you? Were there a few things that cost a lot more than what you had been telling yourself there do in your mind? What we did when we were in this very same position a few years ago was to rank our expenses from most to least important, and then lop off a few at the bottom of the “important” list. This is called prioritization. It is absolutely essential. If you can’t meet your monthly expenses with your income, some things have to go.
    So what can you cut or reduce? This will be a mindset that will carry you through. Every month I’m thinking “what can I cut? What can I reduce?” Check out my post about What Do You NEED Really? for inspiration. For starters, the first things to go for us were:

    1. The cell phone bill. This saved us hundreds of dollars and was a huge motivator. This seems like a big shake up, and some people might stop right here and abandon this whole budget mindset because as a society were are addicted to our phones and cannot even remember how we survived just a few years ago without them. But sometimes a big shake up is exactly what you need. We have honestly not suffered at all without our phones. Jeff has a work phone that his company pays for, and I use my phone just like I used to except only when wifi is available. In the great scheme of priorities, the latest and greatest phone out there with the fastest internet were not even close to the top.
    2. Subscription box. I used to subscribe to Citrus Lane, a subscription box of kids stuff I used to get for $20 a month. I liked getting it, but it was an easy thing to cut. There are so many more subscription services on the market now than when we started; it seems like the industry has kind of exploded, whether its dog treats or kids stuff or new clothes and accessories or makeup or whatever. What seemed like a trifle to me then might be very relatable to people now. None of these are necessary for sustaining your existence.
    3. Weight Watchers app and Gym Memberships. The WW app was another $20 a month, and I don’t even remember what our gym memberships were. I like the WW app, but I had successfully done the program using pen and paper for free before. Cutting the account and going back to this low tech method was a pain in the butt, but I felt like it was worth it. There was a time we had gone to the gym regularly, but that was long ago. Both of us working and having kids at home, it was easier for us to work out at home, and the monthly gym payments had to go.
    4. Reduce grocery spending. When we first started out we were spending over $1,000/month on groceries and eating out. This is obviously outrageous and unsustainable. Since then, keeping food costs down has been my constant hobby. Read all of my thoughts on Surviving the Grocery Stores and Meal Planning, Even When You Hate It. And check out my Week of Budget Dinners.
    5. Reduce heating and electric. Even up until this week I’m still working this. A budget isn’t an iron clad soul surrender that guarantees everything is going to go perfectly. You continuously will have to recommit to your goal. Look at my post Little Things for ideas on how to cut utilities. Turn down the heat, turn up the AC’s or turn them off. Line dry clothes, shorten showers and go to cold water washing. Wring every penny out of your budget to work closer and closer to your goals.
    6. Increase income. Another thing that you can do to get things moving aside from cutting expenses is to add some income. I have a crochet goods side business. I have a friend that drives for Uber. Pick up a few shifts at a second job. One of my favorite things to do for more income is to sell stuff we don’t like/want/need/use anymore. Check out my post 7 Things You Can Do to Save Money This Week! for more information and ideas.

Thats it really. Finances are just numbers, and not even hard math, just addition and subtraction. Ok and division when you figure out the average in the very beginning.

Frequently revisit your budget to make sure that it continues to work for you. Adjust your expected monthly expenses and savings goals. A budget isn’t useful if its not accurate.

And a budget will change your life. You will feel more in control. You will see the change not only in your finances, but over time, in your outlook on spending, saving and what your goals are.

Just try it for six months and see where it takes you.

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Week of Budget Dinners

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Last week on my Instagram account I did quick posts about what I made each night for dinner, along with how much I spent total and then broke it down to the per person costs (for our 5 person family).

I wanted to put them up on here as well so I could post links and more information and so they would be more permanent. I also hope to do this more and more.

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  1. Honey-Apple DrumsticksI found this recipe here, on the Food Network website a few weeks ago searching for easy, healthy dinner ideas. The first night, it got rave reviews, and the second time were even better because I had more practice making the glaze. Even Sam ate two drumsticks after six years of refusing to touch any food with a sauce on it. I was intimidated at first because I had no idea how to make a glaze, but it’s seriously so easy, and I feel like a more experienced cook now. Doesn’t take much I guess.
    Served with two dry packaged Spanish rice bags.
    Cost: $4.88 total, .89/person.

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2. Spiced-Apple-Stuffed French Toast Casserole

After taking two months of the summer off, I restarted Weight Watchers last week (and lost 5.4 lbs!).  So when I was looking for dinner ideas, I knew I should check out some WW ones just to make my life easier. I found this crockpot recipe here, on the Weight Watchers website. I like having breakfast stuff for an easy dinner, and this was just filling enough. The apples and spices in it made it taste like fall, so I’m sure in a few weeks it’ll be a new favorite.
Cost: $4.10 total or .82/person

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3. Soup and Paninis

This is on the meal plan every week. Another easy, fast dinner, and everyone can have just what they want (read: no whining). Conveniently this was for dinner the first night I started feeling really sick with what I now think is Lyme disease after visiting my doctor and starting treatment the other day.
Don’t have a panini maker? No problem. You can also use a waffle iron, a non-stick-sprayed pan (as if you were making grilled cheese), or toast both pieces of bread before assembling the sandwich and microwaving it for a few seconds.
Cost: $4.23 total, or .85/person.

4. Pizza Night

Ok I was feeling pretty cruddy by this point AND I worked until after we usually have dinner, so there’s no picture for pizza night. Anyways, this is another thing that stays on my meal plan. I love pizza. We used to order delivery several times a month; sometimes ever more than once per week. This was obviously ridiculously expensive, and after we added drinks and sides, we could top $40-50 easy, for one dinner. Not wanting to give it up, I have a frozen pizza night weekly. Aldi has a million different varieties that go from classic cheese and pepperoni to roasted veggie bistro style to (my latest favorite) taco and gyro pizza. I get two so little people have options and we usually have left overs for lunch the next day. Sometimes we even do make-your-own, and pick out our own toppings and have a little mini-cheffing.

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5. Honey Mustard Pork Chops

This one was from my Weight Watchers cookbook, but I also found it here, on food.com, except I go with boneless chops. I must be on this week because all the kids ate this one too. Pork chops are so cheap, and after they’re left to marinade, they cook on broil in like 12 minutes.
Served with mashed potatoes (red russet because you don’t have to peel them). You could also add a bag of frozen veggies for under $1.
Cost: $3.60 total or .72/person.

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6. Skinnytaste Greek Chicken Sheet Pan Dinner

From my Skinnytaste Fast and Slow cookbook, but you can also find the recipe here. So I couldn’t fine heirloom carrots and I wasn’t interested in driving all over creation to find them, and I used goat cheese crumbles instead of feta because my Aldi was out this particular day. Anyway, it turned out delicious and we ate every bite. Definitely going on the plan for next week.
Cost: $6.45 total or $1.29/person

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7. Leftovers/ Poverty Meal

I really have to say, when I posted about pasta with butter on my Instagram, I never ever thought it would get such a response. So many people (considering my small amount of followers) either said they had something similar or wanted to know how to make it. Something borne in my childhood when we had no food in the cabinets, and no money to get anything more, this still goes on my meal plan for Wednesday nights to supplement the week’s leftovers. Its cheap, easy and for some reason, everyone seems to like it.
For those of you looking for the recipe: 
Boil 1lb pasta (any type) and drain.
Add 1 stick of butter and mix until butter is melted and pasta is coated.
Sprinkle with grated Parmesan/Romano cheese.
Add salt and basil to taste.
Cost: $1.61 total or .32/person

I really like the idea of the budget meals posts. I’m definitely going to try to post more on here as I discover and try some more out so stay tuned!