I've never had a budget before in my entire life

[mdmc]

I used to have a lot of money and never even needed to balance my checkbook. Then I hit a slump in 2000, and lost a lot of my income.

Now I work, and I have very little money, but I still don't have a budget.

I see my girlfriend making these "worry sheets" budgets. She uses them to make her money stretch to the greatest degree.

I pay all my bills and usually have very little left over. I live paycheck to bi-weekly paycheck.

I am not terribly stupid, but would like some advice. How can I make a budget?

[taught_me_patience]

1. Start by buying everything on credit cards

then at the end of the month, you can see exactly where all of your money is going.

[Bucky]

4. Except that buying on credit cards encourages buying more.

If someone is in a financial crunch, using charge cards is THE worst advice in the world. That's the reason so many stores offer their own credit cards. The physical act of handing over hard cash triggers psychological motor control mechanisms that are absent in the use of plastic money.

But recording purchases made everyday is certainly a good idea. I'd just say go "all cash" and carry a notepad.

[taught_me_patience]

10. That's why American Express green would be good

you have to pay it off at the end of the month. I guaranteet that someone who doesn't do any budgeting would not be able to suddenly record all of their cash transactions. It would be like going from crawling to salsa dancing. Gotta start witht he baby steps!

[Lorien]

54. That's what I was going to suggest. I only use AmEx and my ATM card

because I'm self employed and need a record of every transaction-and thermal paper receipts sometimes fade beyond recognition. You can also have your phone and electric bill paid with AmEx-then take a trip at the end of a year or two after you've built up enough membership rewards points. Using a regular credit card is just asking for trouble, imho.

[maseman]

36. What is the difference handing over a card or paper money?

I use a credit card nearly exclusively (a Marriott points card) and pay it off every month. The good thing is I carry very little cash (safe), I track all my expenditures without logging anything, I get points to use for a free week in a nice hotel once every two years or so.

[taught_me_patience]

41. It actually causes me to buy less

because at the end of the month I can see all the things I wasted my money on and make sure I don't repeat that mistake. Living below your means is the key! A credit card makes recording transactions so much easier. Instead of carrying a notepad around, you can just check you balance online and see how much you've spent in the entire month.

[Xenotime]

55. Please..

There are systems that help identify where the money is going.

[Donnachaidh]

6. and you can also be paying FEES to find out where your money is going.

:eyes:

Here's a CHEAPER clue -- go buy one of those little pads of paper, the tiny ones with the covers and the rings to hold it all together. They cost maybe a buck and a half. Then, when you buy something, WRITE IT DOWN. Make sure you keep track of the dates of the purchases, etc. Write EVERYTHING down -- I mean EVERYTHING. Or if you're embarrassed to pull out the book, ask for receipts and do a tally every night.

Do this for a MONTH. You'll see exactly where the money is being pissed away. THEN sit down and figure out what is important to pay (rent, utilities, etc) and cut out the extras that you can live without and the pissing habits.

Voila! Then you can start stretching.

[taught_me_patience]

15. Why are people so afraid of credit cards?

All of mine are no fee and even give cash back. Plus, they allow you to have up to a two month free loan on money before having to pay it off. Just pay the balance off every month... it's so simple.

[Donnachaidh]

21. you see -- this is the mindset that gets people into trouble

and gives the banks all those luscious FEES when something catastrophic hits and you CAN'T pay it back at the end of the month.

People who do NOT know how to BUDGET, and have always *just spent* their money do NOT know how to work within limits. And the banks just LOOOOVE those folks, because they haven't the skills to keep out of the banks *fee schedules*.

Personally, with the markets the way they are - I like hard currency. That plastic you're so fond of may NOT be there when you most need it. As far as the banking world goes, the major shit hasn't hit the fan yet. :shrug:

[sarcasmo]

38. Loose a job and then find out why people are afraid of credit cards.

If I wouldn't know better I would guess you to be a Republican economist.

[taught_me_patience]

39. is this sarcastic?

WTF!?!? I know many people who are financially well off and use credit cards almost solely for transactions. There is no difference between a transaction recorded in paper vs. one recorded electronically, except the one recorded electronically is infinitely easier to keep track of. At any moment in the day, I can easily tell you what I spent last month and what it was spent on. Using a credit card is not bad... using a credit card to pay for things that you cannot afford is bad.

[rpannier]

45. It probably isn't sarcastic

Some people have trouble managing money and as a result also can't maage their credit cards.

I have known people who have had more than 10 credit cards : 4-5 visa cards,2-3 mastercards, a diners club, amex, discover, etc

They fill out those forms for new cards

Part of their rationale is they've spent too much on their other cards and need this new one for emergencies, which they use until it's too close to max for emergencies and then they get another

I have six credit cards. I live overseas. I use one for work expenditures (except airfare), I have 1 credit card I use for flights (both work and leisure) it's tied to KAL, I have one for emergencies, 1 for everyday expenses, my wife has one for herself and I have one because I've been with the company for over 15 years. It was my first, it maxes at 250 dollars and to cancel it would damage my credit rating.

Having a credit card (or 6 or 10) does NOT mean people have to use them. I think most of the necessary use early on was impulse shopping for bigger tv's, entertainment systems, etc.
They weren't really necessities.
Now, because of the bush economy people have major expenses they can't cover because of job loss, downsizing, inflation, weak dollar, etc

The credit card companies, for the most part, are run by ruthless bastards that I hope catch every debilitating disease known to man.

That being said, no one forced you to apply

[sarcasmo]

50. Have you ever lost a job and had credit card balances?

On Edit: Paying cash for your purchases is the smarter way to go, it makes you think more before you buy.

[depakid]

9. Credit cards?

[Trailrider1951]

31. Naaaah, get a shoe box and put ALL your receipts in it

Note on each one what it was for, i.e., groceries, home or auto repair, gasoline, heating oil, etc. THEN you'll know where your money is going without worrying about over limit fees, interest, unintended purchases, etc. Make your monthly budget from this, but be sure to leave $150 or so for "emergencies". Good luck!

[taught_me_patience]

42. Then spend hours of precious time

trying to add it all up. It takes seconds to check a credit card balance online.

[Xenotime]

56. Agreed. You can even categorize your spending..

It's very quick and easy to manage money and it builds your credit score.

[sarcasmo]

37. That's a terrible idea. Explain how someone living week to week should be paying for everything with

a credit card and then pay it back at twenty percent plus interest the end of the next months. Proud to have destroyed our credit cards, you spend less when you have to pay with cash.

[taught_me_patience]

40. If you pay it off in full.

then you don't have to pay interest. And if you pay everything with a credit card, then you'll have cash saved up at the end of the month to pay it off.

[sarcasmo]

43. If your living paycheck to paycheck you can't pay it off in full.

You have obviously never lived paycheck to paycheck.

[lumberjack_jeff]

61. That is bad advice for someone who has never had a budget.

A lot of my spending is done through a credit card because I get a cash rebate and because I get 30+ days of float before I pay it off.

Making credit cards work for you is a skill that few have, and there are many for whom it can't work.

[Donnachaidh]

2. too proud to ask your girlfriend?

"She uses them to make her money stretch to the greatest degree."

She sounds like she can teach you a thing or two. :evilgrin:

[mdmc]

32. lol

exactly:)

She has her budget down to the penny. And I am too proud to admit that its not that budgeting is easy for me. She always says that she never sees me do a budget. I act like I do it in my head. Terrible.

[justinsb]

3. You're not Henry Paulson by any chance are you? n/t

[AzDar]

27. LOL...

:thumbsup:

[femrap]

30. Too damn funny....nt

[DissentIsPatriotic]

5. Sounds like your girlfriend knows...why aren't you asking her,

if you don't mind me asking you?

[mdmc]

33. well

pride, foolish pride!

She has her budget down to the penny. And I am too proud to admit that its not that budgeting is easy for me. She always says that she never sees me do a budget. I act like I do it in my head. Terrible.

[DissentIsPatriotic]

51. dupe

[DissentIsPatriotic]

52. my husband also pretends he can budget, but he only

pretends for a little while, then he has a meltdown and asks for help. You are missing a bonding opportunity.

[ChicagoRonin]

7. Hopefully your first advice

Just to let you know, in my opinion, mentioning that you used to have a lot of money and never needed to balance your checkbook will not gain you a lot of sympathy from many folks and may result in some hostile responses. Something to keep in mind.

Getting down to business: What I did for my first budget was to set up an Excel spreadsheet that accounted for all my monthly spending for the past 3-six months. Then I plugged in records of my earnings, and came up with what my average month-to-month income and expenses were. I then set myself strict targets for all spending (rent, utilities, food, entertainment, etc.) that I do not exceed except in extreme circumstances.

Sounds ridiculously simple, but keep this in mind: As of today (at age 34) I have fully paid up for my car (bought used from CarMax) and my student loans (graduates from an expensive university in 1995). The only debt I have left is on my credit card as a result of a series of dental operations that my insurance didn't cover, and that I am slowly but surely whittling away.

[mdmc]

34. congratulations on getting that student load done

thanks for the info

[Extend a Hand]

8. start by getting a little note book

and keeping track of everything you spend for a month.

[Bucky]

13. Also, buy a ski mask and a snub nosed revolver. Then find a secluded bank.

Even in a worst-case scenario you'll end up getting your three square meals a day.

[Extend a Hand]

28. that might improve the balance sheet

but I'm not sure it would help out on the budgeting process ;)

[sinkingfeeling]

11. Start by listing how much money you have 'on hand': in the bank.

Then add in your net paychecks and you know what your 'assets' are. Then start listing your 'fixed' monthly expenses: rent or mortgage payment, utilities, any car payment, etc. Then figure your variable expenses: food, entertainment, clothes, etc.

See what you actually spend in a month's time and what 'wiggle room' you have.

[Bucky]

12. First, start putting $100-$200 a month aside into a fund you can't touch.

Bonds, T-bills, IRAs---put it somewhere and let it grow. 10 years from now you'll stun yourself. That paycheck to paycheck stuff will kill ya. I know, I know, you can't find the money to squeeze out. Do it upfront anyway. Create a passive deposit system. We always make do with what we have. Use that skill to your benefit. A day soon will come when it may save your life to have done this now.

[malaise]

20. That's #1

We save with the credit union and we also save with a special fund.

[Speck Tater]

14. There's only one thing you need to do.

Get a copy of the book Your Money or Your Life by Joe Dominguez and Vicki Robin.

[youthere]

16. start by making a list of the "must haves"...

The things that you cannot survive, or make an income without...

You must have food
You must have shelter
You must have water and electricity
You must have gas in your vehicle to get to work (assuming you drive)
and You must have savings (yes..this is a MUST)


You make an allotment for each one of those MUST have items some other items might be insurance, or vehicle payments.

These are all things that must be paid each month (or in the case of groceries probably weekly) and are first prioirty.

Then you list the outstanding debt you might have (credit cards, medical bills and the like)
You also need to list the non-essential-but-still important expenditures you know you're going to have to make like haircuts, clothing (jeans don't last forever), maybe eating out or a movie once every so often, the tires going to need new tires someday, what about property taxes? vehicle registration? doctor's visits?
you get the idea...

take those two lists..and the money you have left AFTER your MUST HAVES, and create an allotment for each line item.

Before you can even start you have to know what comes IN every month, and what normally goes OUT. So you'll have to scrape together all the receipts and bill stubs you can, to get an idea where your money goes.

Here is a good place for you to start:
http://financialplan.about.com/od/budgetingyourmoney/ht/createbudget.htm

[Matariki]

17. I use multiple accounts. 2 checking & 2 savings.

My paycheck goes straight into my main checking account. A set amount goes into savings, divided between long term savings and short term savings for large items i want and travel.

I've added up all my essential payments, mortgage, utilities, car insurance, etc and that stays in the main account.

The remainder I can spend freely on going out, clothes, books and so forth. I 'pay' myself into this 2nd checking account once a week and when it's gone, it's gone. I do it once a week because I found if I did it once a month it would be gone a lot more quickly.

This way I don't end up spending my mortgage and bill money but I also don't have to get super granular with my budget. I tried writing *everything* down for a while and that never worked for me. Lasted about a half day anytime I tried.

This method has been working very well for me. I used to bounce my checking account a lot because I didn't like to pay much attention to the balance. I try to use cash for my discretionary as much as possible too, taking cash from the 2nd checking account.

[nadinbrzezinski]

18. Write down every cent you spend for a couple of months

patters will emerge.

And you will see expenses you can cut down.

Like coffee at the coffee shop.. yep, been there, done that

Candy, you don't need it.

And after a couple of months you can seat down and make a budget,

Remember, you need to save for some things, and you also need to set an emergency account

[angstlessk]

19. I created this great excel spread sheet that will show you how

what you spend today will effect you (depending on how far out you cast the budget) a year from now and how savings can add up pretty substantially.

PM me and I can either create one for you, based on your numbers or just send you an emply one with all the formulas and you just fill in the income/expenses that pertains to you.

[fight4my3sons]

22. we track every single penny we spend in Money program

It has really helped us see where our money goes and keep a budget.

[CTyankee]

23. Call it a "spending plan" not a budget. Sounds better but is the same thing.

I do the lined legal pad method, expenses on one side, income on the other, what goes out vs. what comes in. I look at how much I spend by month (rent, utilities, food, entertaiment, clothes, interest you pay on any debt except mortgage interest, gym membership, personal grooming, lunch expenses, gas/car maintenance) and multiply by 12. Of course, some things are bi-annual (car insurance) or seasonal (Christmas/birthday presents for the 4 grandkids)so I add that in after the tally of monthly bills/spending.

An Excel spreadsheet can produce a pie shape chart so that you can see graphically where your money goes! What an eyeopener that is!

This leads you to look at each item and say to yourself "Where can I save here?" That's what is so great about a budget! You find all kinds of things, from lower insurance rates to haircuts. It works well, believe me!

[AlCzervik]

24. take one week and put every receipt you get in an envelope and then at the end of the

week go through them all, did you buy only what you needed or did you buy that plus stuff you could do without? I pay the bills at my house and i go over everything very carefully and i also stopped using my debit card, now i get cash once a week and if i run out then thats that.

[pinto]

25. Keep it simple, imho.

Pay the basics - the real basics - first. Housing, utilities, food and transportation. No ifs, ands or buts. Pay bi-weekly, when you get paid. (Which you seem to do.)

Consider all else discretionary, and prioritize on a scale of need, not want. Pay those you need first, bi-weekly, when you get paid.

(Work at saving a set per cent of each paycheck, in a separate account, however small, consistently. Not to be touched. Annual costs, like car registration and such, could be set aside here on a bi-weekly rate as well, so you have it when the bill comes due.)

What's left, do with as you want. Target this spending at a bi-weekly "allowance" from your payday.

(Most banks have direct deposit and automatic payment services for free. Use those for the basics. They'll go out each payday and help you keep on budget.)

If it doesn't work out, look at reducing costs in each category. If that doesn't work, ask for help.

Just my 2 cents, everyone has different money handling styles. This works for me on a limited budget.

[mcscajun]

26. I use Quicken. Put in all your paychecks (net, not gross) for the next 3-4 months.....

Properly dated, of course for the future. Then put in all your fixed expenses (housing payments, electric and other utilities, phone/internet bills, commuting costs, credit card payments...whatever you know you have to pay every month) for the same time period and of course, dated for the time they are due. If at all possible, include a small amount for savings; if you don't treat savings as a necessary expense, spending takes precedence and you never build up any reserve.

Quicken will show you how much money you have left for food, clothing, and entertainment, if any, for each month/pay period.

The more info you give Quicken, the more accurate your income/spending projection will be. If your income projection is less than your spending projection, then you can see where and when you need to cut back.

I don't call it a budget. I hate that word. But it works out the same, and I don't have to sweat over paper and pencil or making a spreadsheet; both are too tedious for words.

[seasat]

46. I'll second Quicken

We started using it years ago. I couldn't be simpler. Since the majority of our purchases are through debit cards, we can go online to our bank and download the latest transactions. We don't even have to worry about entering them now. It has helped us get our finances under control.

[End Of The Road]

60. And I'll third it

Enter EVERY expense you can think of for the coming months. Do you get quarterly insurance bills? Annual tax bill? If you're on a budget, you've got to save for periodic payments in advance, and Quicken really helps this way.

[femrap]

29. Go to the library....google personal budgeting.

Are you sure you're not terribly stupid?

I hear the latest thing is to become a hot call girl. Rent 'Pretty Woman' and take notes.

[KG]

35. stop buying stuff.

food, gas, insurance, rent. that's your budget

[mdmc]

59. that is all I buy

plus monthly movie tickets..

[annonymous]

44. I use Quicken to track my expenses.

It is relatively easy to set up expense categories in Quicken to track expenses such as groceries, gas, etc. as well as credit cards, bank accounts, paychecks. It takes a bit of time to become proficient at tracking all of your expenses and you may have to add categories in Quicken to cover expenses you missed during your initial setup. Once you track your expenses for a few months, you can see where you need to cut back your spending. It also helps to use envelopes to track specific expenses i.e. groceries, gas, etc. so you can enter the receipts in Quicken without much guesswork.

[Rosemary2205]

49. I strongly second the advice about QUICKEN - also the envelope system may be better

It takes a little time to set up Quicken but once you get the categories set up in the very beginning, it pretty much runs itself. All you do is enter your info just like in the checkbook at once a week or once a month or whenever - a couple clicks and you can print a report showing everything you made, spent, and on what.

There's also the envelope system for those who just don't have the patience for a checkbook period. Figure out your budget and make up envelopes for each item you have to pay or buy. Write on the envelope exactly how much money has to go in there every pay period to be able to pay the bill when it comes. For instance, I get paid every 2 weeks (not twice a month) - I actually get 26 paychecks a year, but since there are 4 weeks in a month I just set it up for half the bill in the envelope one week and half the other week. You will have to go through the hassle of making sure you have the right cash to put in the envelopes.

I will tell you, if your food or gas budget every week is $50 cash, and you know that when that cash runs out you go hungry. It WILL influence your choices right away. IMHO going all cash with the envelopes is really an effective way to make yourself create and stick to a budget.

[lumberjack_jeff]

62. I've been using Quicken for many years.

It is the only practical way for me.

[calico1]

47. I use this site a lot:

http://www.stretcher.com/index.cfm

Has a wealth of good information though some of it can be a little over the top. Mostly good stuff though.

I also recommend the book "Your money Or your Life" as someone else did. Go to your library and borrow books on saving, budgeting, etc.

Unless you are disciplined and know everything that is coming in and going out (and it sounds as though you don't :D ) then using a credit card for everything is a very bad idea. There is a reason why so many people in this country are deep in debt.

[MissB]

48. Two excellent resource recommendations!

The stretcher has a topic index. The budget topic is at: http://www.stretcher.com/menu/topic-a.htm#budgets The topic about customized budgeting software has some good info on basic budget percentages that might help the OP.

I loved the YMOYL book and have recommended it many times. It's a good tool to help transform how you view money and the end result is that you'll probably spend less money on frivolous items.


To the OP: I had to sit down with my SIL a few years back. She was in her mid-40s at the time and had never, ever done a budget. It was desperation time for her - she was just divorced and struggling to make her house payment and other bills. It was shocking to me that she had never budgeted - I figured that everyone knew it, but I guess it isn't a skill that is necessarily passed down in families or taught in schools. It should be.

That being said, many other people have told the OP that accounting for income and expenses is the first step. It may seem like the most obvious, but it is very important. Nailing down where your money is coming from and going to is a huge first step towards making a budget.

[Matariki]

53. 10 Ways to Simplify Your Budget

I like this approach. Writing *everything* down makes me crazy.

http://zenhabits.net/2007/05/10-ways-to-simplify-your-budget/

[Xenotime]

57. #9 Dump Credit Cards

You ruin your FICO score if you do that.

[Matariki]

58. True. The better choice would be to cut all up but the one with lowest interest

Or put them in the freezer or whatever works to not use them.

On the other hand, better to put a dent in the FICO score than run up enormous debt because of a lack of self restraint.

As far as the article goes, I like using a variation of the '60%' idea. It's simple, stresses saving and leaves money for guilt free spending on 'fun' items without having to 'write down' every book, beer or coffee I buy. Probably like most people my living expenses are a bit over 60% of my income, but I find general idea useful.

[mdmc]

63. kick