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Budgeting your finances sounds easy, and theoretically, it is. But, often times, when you put a budget on paper, it doesn’t match up with real-life practice.
You set aside $200 for groceries, spend $180 and somewhere lose that $20 plus another $10.
Then there’s an auto withdrawal you forgot about, an emergency Starbucks trip and before you know it, you’re stuck with an overdraft fee.
Life shouldn’t be this difficult.
Budgeting shouldn’t be this difficult.
On paper, everything looked perfect, so what happened?
Where did you’re money go?
In this post, we’re going to explore some ways to check for leaks in your budget and talk about ways we can find and fix them.
Now, I’m going to tell you something that nobody told me when I first started budgeting.
It takes 3-5 months to perfect your budget plan.
Seriously, with how easy it always sounded- I expected results to be quicker. So imagine my frustration when nothing added up, month after month until all of our leaks were caught and fixed.
That’s what we gotta do here.
After we find the budget leaks, we fix and fine tune it until it’s perfect.
Unfortunately, it can sometimes take a few months to find all these pinhole-sized leaks. Can’t fix them if we don’t know they exist, which is why it often takes 3-5 months to perfect your budget plan.
If you have a budget already, then follow it as best as you can while following the advice here.
If you do not have one, then carry on with life as normally as possible while following the advice given, this will help you write a master budget plan.
To make this easier, I have a download printable available for a free blank monthly budget worksheet to keep track of your income and expenses.
Click the download button to print. Please note that this is for a single blank sheet, and you may wish to make additional copies for your convenience.
I recommend putting them somewhere you see them everyday.
Write down your incomes, and every expense, no matter how small.
Every time you get handed a $10 for cash from a friend, every time you gift away $20 to someone in need.
Make sure every dollar is counted, no expense is too small.
Go the extra mile and save all of your receipts too.
Saving your receipts will help you to not only track your expenses but also help you see exactly what you bought.
Junk food, gas station pies, several ATM charges from withdrawing small amounts at a time. It all adds up, and seeing HOW it adds up, really helps when making a budget.
Start this process on the first of a month.
Write down every expense, and paperclip a receipt to the back of the budget worksheet. If it was an auto withdrawal, note it on the paper and at the end of the month, reflect back.
If you’re as organized as me, you’ll want to organize your expenses into categories. Food, entertainment, gas, utilities, rent/mortgage, etc.
I happen to take it one step further and divide food up by wants vs needs and divide into smaller categories (store sections.) It’s how I found out that when I had a $300 monthly grocery limit, I spend about $160 on fresh produce, $30 on meat and the rest on non-perishables and impulse buys.
Tracking things like this really help to get you in the correct mindset when you meal plan later.
Okay, month’s over and you’ve collected your notes. Now what?
Look back at the expenses for this month. Did anything stand out?
Our first month of a written budget we over drafted because I didn’t plan for over $200 worth of my husband’s auto-withdrawal subscriptions to various video games! You can bet they were canceled by the following month. #NewlyWedLife
Did you see anything like this on your expenses?
Make sure you look and account for every dollar, incoming money should match outgoing money.
If you see any cuttable expenses off the bat, go forth and trim them.
Now continue this for another month.
Did you have any more surprise expenses?
If you did, trim and repeat. if you didn’t, move on to the next step of actually making a written budget.
That’s right, you can finally make a budget.
How to make a perfect budget
On a new blank worksheet, write down your income and planned expenses.
If you noticed a trend with your monthly logging, and always needing to pull a little money from here or there to account for unexpected expenses, then consider leaving a “cushion” of money aside to account for these things.
We would personally leave $200 in our account after bills, to be used as a cushion. This also went towards our entertainment/play money. Which can be important to include as well.
Not giving yourself a few dollars here or there to blow on things can make budgeting less fun, more stressful and more likely to have you quit.
Helpful tip for when the money difference varies
When your income isn’t a set amount, lowball budget.
How to Lowball budget
Underestimate what you’ll be getting on that check. Use the lowest income you’ve received in the past 6 months, or round down to the nearest whole number that makes sense for your situation.
By budgeting for a small paycheck, you’re prepared for one.
In the event you get more than that amount, you now have even more to divide between savings and debts. So really, it’s like a win, because when the money comes you’ll get just as excited as you do when you find a crisp new $5 in a pair of jeans on laundry day.
When your expenses vary monthly.
Bills such as electricity, water and gas can vary month to month. Most of us don’t have a set bill amount to pay every month and are often shocked by what our usage is. (Or maybe, that’s just me.)
When you have bills like this in your life, it’s very helpful to overestimate what they may be.
Why it’s good to over estimate on your bills
Overestimating allows you to be prepared and excited if they come in under your estimation.
If you’re lucky enough to have been in your location long enough, then you may have access to last years records. Use last years records to help you budget this year, just round up to the nearest whole dollar.
If you haven’t been there long enough to get last years records, use your highest current expenses with that company and add to it.
Rounding up to even numbers really helps with tracking your money.
You underestimated your income and over estimated your bills. So now you have hundreds of unbudgeted money.
Well, first of all… Congratulations, you are doing very well for yourself.
To be able to budget so tightly is an accomplishment that should be celebrated. Not many can do this.
As for what to do with that “extra” budget money. It’s really up to you. I do suggest building up a small emergency savings of about $1,000. While this won’t cover large emergencies in your life, it will help to soften the blow on any emergency that unexpectedly comes your way.
With the rest of the money, I’d suggest paying off your debts, arranged smallest to largest in total amounts.
This is often referred to as the snowball method, because it picks up speed and size as it goes towards your largest debt.
Knocking out the small ones in the way, giving you a motivational boost and “small reward” feeling of accomplishment as you do so.
Dave Ramsey, author of the book, Total Money Makeover and talk show host. Is a HUGE advocate for the snowball method when it comes to paying down debt.
If you’ve followed through and gotten this far, you’re no doubt a budgeting expert in your house now. You can continue to cut costs in other ways to help stretch your finances.
What were some of the leaks you found in your budget?
Did you leave a cushion space for emergencies?
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