Thursday, February 7, 2013

Building a better budget

We did it!!!
We went an entire month without using a credit card...
One step closer to being debt-free.
Such a good feeling!

I was asked to teach a lesson at church on budgeting and family finance the 5th Sunday in December.
I knew a few months ahead of time & honestly was dreading it.
I mean really, really dreading it.
I knew that the lesson was probably Heavenly Father's way of helping me figure out what I was doing wrong with our finances though & that I would probably benefit most out of anyone just by preparing the lesson so I studied up, learned a lot, & found some wonderful resources along the way.

I talked a little bit about each of the 5 Basics of Family Finances that The Church of Jesus Christ of Latter Day Saints has provided on
                                                                1. Pay tithes & offerings
                                                                2. Avoid debt
                                                                3. Use a budget
                                                                4. Build a reserve
                                                                5. Teach family members

I learned the most when I was researching about budgets and I want to share some of the things I learned that may help you out with your budgets & staying out of debt...

When creating a budget, you can start with a basic (or complex) budget worksheet or a budget software...
There are plenty of options out there on the internet, both free & not-so-free, but what's important is that you find something that works for you!

Some other important things that you should remember while creating a budget are:
Know where your money is going...
I cannot stress how important this is! 
If you don't account for everything in your budget then you don't truly know where all of your money is going. It's more than just budgeting enough money for the essentials.
For the longest time I thought that if I created a budget where I would make sure our tithing and bills were paid first, then the rest of the money could go towards the variables like food, gas, household essentials, and other things.
Surely we would have more than enough left over to cover those things, right?
I was wrong.
When those things were only loosely budgeted for, I didn't realize how much we were spending each month
on unnecessary things, & how many things we should have been budgeting for but weren't. I knew our credit card debt was slowly increasing though. We were in this vicious cycle where we would practically pay the cards off each year with tax returns, then by the end of the year, we were back where we started.
Our yearly credit card float so to speak...
We assumed we just weren't making enough, and we were sick of this happening year after year. Back in September (before I knew I was going to teach) I decided to track our expenses more closely in hopes that we could get to the bottom of it and figure out what the culprit was, & either cut out the unnecessary things or get a job. So I did the following...

Keep a record of your expenditures...
Record and review your income and expenses for the past few months so that you have an idea about where most of your money is going. I found a budget spreadsheet in September that was helping us track our spending. I quickly realized that we were spending between $150-$200 a month on fast food in addition to the money budgeted for groceries, approximately $300 at places like Target & Walmart for household goods & who knows what else, & sometimes $400+ on other random expenses like dates, haircuts, movies, Christmas presents & things we didn't 'budget' for... No wonder we were putting things on credit cards each month! We didn't know what we were spending our money on. The second I started working on the lesson & we became more aware, we noticed that the numbers started going down & we weren't putting as much on the card. What a relief that was!

Determine how to reduce what you spend for non-essentials...
Use the info you gather to establish a family budget. Make sure you account for tithing & fast offerings first, then figure how much you will need for housing, utilities, transportation, bills, insurance, food, savings, and so on. Discipline yourself to stay within your budget plan. Budget worksheets &/or software are there to help you with your plan. This goes back to making sure you find something that works for you... I found that a simple worksheet just wasn't for me because I would leave things out of our budget that I should have saved up throughout the year for (Christmas for example).
I was teaching with someone else from our stake & learned something from him that can help you decide what non-essentials can be cut out... Ask yourself if your expenses are supporting life, or lifestyle.
If it's supporting life, you should definitely make room in your budget for it. If it's supporting lifestyle, chances are it's not a necessity & you can cut corners in those areas to save money. Brilliant, I know!
One way we recently did that was by getting a Roku instead of paying for cable or satellite TV each month. We just pay for Netflix & Hulu Plus now. At first we thought we'd miss regular TV, but we love our Roku!

Enter ALL income and expenses each time you prepare a budget...
Key word is ALL!
If you leave things out, you may think you have extra money to spend when it is really already accounted for,
which could lead to debt. We noticed a difference right away once we started doing that...
Because income and expenses can vary from week to week & month to month, prepare a new budget each and every week, bi-weekly, or monthly rather than a whole year.

I stumbled across this awesome website called You Need A Budget while planning my lesson. The YNAB
software utilizes four budgeting rules to help people create budgets and save their money.

YNAB's four budgeting rules:
                    1. Give every dollar a job (Be the boss of ALL of your money)
                    2. Save for a rainy day (Break all big expenses into manageable monthly chunks)
                    3. Roll with the punches (Be flexible & address overspending before it becomes a problem)
                    4. Live on last month's income (Stop living paycheck to paycheck)

Totally. makes. sense.

Here's what Jesse Mecham (the creator of You Need A Budget) says about budgeting from an LDS perspective: "I was born and raised LDS, and was taught that it's important to see money more as a stewardship situation than the fact that it's MY money. So budgeting is actually just making sure that we're good stewards with what we've been given."
I thought that was cool.

I decided to try the 34 day free trial of the software because we seriously wanted change and it seemed like a good method, but I wasn't about to pay $60 on a budgeting software. Seemed kind of contradictory.
I mean we were trying to save money, why spend it when there are so many free options out there?
Turns out the method really does work!
We could tell we were saving money & could see the gradual incline of our net worth.
Again, we haven't used our cards at all this month!
I fell in love with the software, and decided to budget that $60 so that we could continue to use it after the trial period because we had finally found something that worked for us!

We purchased it for $60, but they have a refer-a-friend program
which allows you (my friends) to get it for only $54...
Here's the link if you want that discount.
You're welcome.

We weren't doing terrible with our finances, but we weren't doing great either.
We lived paycheck to paycheck and still do at the moment, but with less financial stress since we're building a reserve, & without going further into debt.

"Latter-day Saints have been counseled for many years to prepare for adversity by having a little money set aside. Doing so adds immeasurably to security and well-being. Every family has a responsibility to provide for its own needs to the extent possible. We encourage you wherever you may live in the world to prepare for adversity by looking to the condition of your finances. We urge you to be modest in your expenditures; discipline yourselves in your purchases to avoid debt. Pay off debt as quickly as you can, and free yourselves from this bondage. Save a little money regularly to gradually build a financial reserve. If you have paid your debts and have a financial reserve, even though it be small, you and your family will feel more secure and enjoy greater peace in your hearts. May the Lord bless you in your family financial efforts."
- First Presidency of the Church of Jesus Christ of Latter-Day Saints -

Interested in buying YNAB? Check out this link to save $6 off your purchase!

1 comment:

  1. What a great article! We have little challenges we try to do monthly as well. Thankfully we do not have credit card debt- we have adapted the "if we don't have the money in the bank- we don't buy it" motto.
    I am actually thankful that my search for structured settlement companies brought me to your page.
    I really enjoyed reading about your family's budget plans. Thanks so much for sharing. I think I'll borrow a few of these ideas.



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