Second, you do need to know how much your net income (what you bring home) is each month. Keith works in sales which means the majority of his pay is commission based so no two paychecks are the same. If you have a situation like this, average a reasonable period such as 6 or 12 months and use that as your monthly base.
Next, accounting for all your fixed expenses such as your house payment/rent, utilities, phone, etc. All those things you have commitments for each and every month. If your children are involved in activities with monthly dues I would also add that here. You can’t live without food right? So identify a food budget as well. I personally separate our groceries and dining out because it’s eye opening some months to see how much we spend eating out. These are all the things you need each month. I found this article which suggest a good rule of thumb for needs should be no more than 50% of your budget.
My mom always told me to pay myself first! That was really, really hard to do when I was broke but my goal is to set aside at least 10% every month in savings. Dave Ramsey would tell you to work to build enough to cover 3 to 6 months of expenses in case there was an emergency such as a loss of income.
What’s left? Well, you have your wants remaining. Like I mentioned last week, spending zero on frivolous items is probably not very realistic for me. Setting an amount I can spend each month will give me a little freedom to feel like I can have a little fun but accountability of staying within that amount will help us set aside money for bigger things.
Other considerations for monthly budgeting include charitable donations/tithing and also set asides for things like car maintenance and registration, home repairs and of course a little nest egg for those future vacations.
Having a record of where we spend totally saves me when we have a tight month because I know exactly where and how we typically choose to overspend. As I head into this year of wanting to waste not, it is important to take a close look.
Once you have this down the next step is accountability! If you are anything like me this means not just to yourself. I need someone else to know the plan and help keep me accountable and call me out when I overspend. I’m the money manager at our house and Keith is perfectly content just letting me handle things but I would really like us to have more time together reviewing all of our expenses. I totally think if I knew he would be looking at the detail I would think twice before I hitting the checkout button!
So do you keep a monthly budget? I can’t wait to read everyone’s methods!
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