BASICS

How most startBudgeting

???

Budgeting is about learning to Live BELOW Your Means

• Lets you be in control of where your money goes(Rather than wonder where it went)

• Enables Generosity• Helps you Live Debt-Free• Creates a Buffer-Zone for emergencies • Helps you Plan/Prepare for future

(goals, vacations, education, retirement)• Helps you answer the question….

“What did I do with what God gave me?”

(whether you think it is a little or a lot)

The Budget Toolbox

• Balance Sheet (Know where you are at)

• Debt Listing (Know what you owe)

• Goals Listing (Know what’s important)

• Spending Plan (Know where it should go)

• Tracking (Know where it went)

BudgetingSPENDING

for Beginners

1 2 3

1 – START WITH A PLAN• Lets you be in control of where your money

goes (Rather than wonder where it went)• Enables Generosity• Helps you Live Debt-Free• Creates a Buffer-Zone for emergencies • Helps you Plan/Prepare for future

(goals, vacations, education, retirement)• Helps you answer the question….

– “What did I do with what God gave me?”

– (whether you think it is a little or a lot)

What You Need…• Pay Stubs• List of Expenses• List of Debts• Calculator• Spending Plan• Envelopes

Work with 3 Bank Accounts:1. Daily Checking – Income/Monthly Payments

2. Savings – Periodic & Annual Payments

3. Savings – Emergency

Follow the PLAN and not your Bank Account

The Spending Plan

List your INCOME…• After tax dollars (Net Income) –

the money that gets deposited in your account

• Include all sources (tips, gifts, commission, salary, etc.)

• Include variable income (commission, self-employed, etc.) use the average for the last 3-5 years as your income

NEEDS

50%

‘Must-Have’ Expenses (NEEDS 50%)

• List your ‘MUST HAVE’ Expenses This covers basic expenses you must have each month:

• Rent/Mortgage• Utilities• Contracted Services

(cell phone, Internet, etc.)• Food (groceries) • Child Care• Tuition• Car Payment/Transportation • Insurance• Minimum Debt Re-Payments

• Don’t forget the annual fixed expenses: taxes, winter heat, annual insurance, etc. Divide by 12 for the monthly budget expense

GENEROSITY & SAVINGS (20%)• Include generosity (10%) – so that it breaks

the hold debt/money has on you!• Include savings (10%) – so that you create

‘breathing space’ and somewhere to turn other than more debt. Start with something each month.

• If you are in debt, start with $500-2000 ; • Keep in a separate emergency savings

account and replenish as soon as possible if used

• Once you are out of debt, build this up to 3-6 months expenses/budget

WANTS

30%

‘I Want’ Expenses (30%)• Now figure out your other Wants Expenses.

These expenses are ones that you can cut back on how much you spend on them when needed.

• They may include eating out, clothing, recreation/entertainment, vacation, etc.

• Some may overlap with NEEDS – > Your basic phone is a NEED, but all the bonus features are WANTS

• If you are unsure, look back over the last 3-6 months to determine what you normally spend each month.

The Bottom Line…• Now see if you Balance, (your total

expenses are less than your income)• If you are spending more than you are

make, you need to make some changes

• If you are spending less than you make, then consider increasing your generosity and savings (both emergency and long term savings)

• Keep working at your budget until you can get it to ‘balance’

Spending more than you have?

• Compare your total with the suggested percentage guidelines (50-30-20)

• Look at the WANT Expenses to see where you might cut back

• Consider changing providers (phone, internet),

• Consider moving to a cheaper home, etc.

• Look at your income and see if you can increase it

• Sell some stuff (this is a short-term solution, because next month you’ll still have your expense but no more stuff to sell)

50-30-20 Budget

50% NEEDS - keep in bank accounts

20% GIVE/SAVE - transfer 10% to savings;keep 10% giving in bank or withdraw as cash

30% WANTS - Take out in cash

(+ groceries)

ENVELOPE SYSTEM• There is a reason most

Getting out of Debt Programs use the Envelope System (IT WORKS!)

• Tangible benefits – you see your money being spent

• Spend Less when using cash• Math-Challenged Friendly• Save for Special Purchases• Eliminates the guess work in “Can We Afford

That?”

How it Works…• Label an envelope with each of the remaining

budget/spending categories and put the budgeted amount into the appropriate envelope – giving, groceries, gas/transportation, etc.

• Use the money in the envelopes to live/spend from each month as needed – but once the money is gone, you have to either borrow from another envelope or STOP SPENDING

• If there is money left over in any of the envelopes, you can save it for next month, put it into savings, or use it for an ‘unbudgeted’ specials (take your spouse out for lunch or something)

2 – Track the Plan• Either stay on the envelop system (because it

really works) or you can move to another paper, excel, software, internet spending plan.

• Keep track of all your expenses – both the regular bills and all the daily stuff you pay out of your pocket for (lunch, snacks, magazines, etc.).

• Find a safe but accessible spot to store these receipts

• Get into the habit of once a day entering them into your spending plan / budget system

3- Adjust & Flex• Life happens. Car repairs,

emergencies, etc. • When it does, you’ll need

to adjust your budget accordingly – but this does not mean turning to debt or living beyond your means again.

• Instead, you can move money from your clothing category or other areas to pay for the unexpected expense.

• But as you move money around – make sure you still stay in your overall budget.

Evaluate Regularly…• Life changes. So does your budget. • After you have followed your budget for a

month or two you may want to change a few areas to be more realistic with your life & spending

• Evaluate each month and keep tweaking your budget until it works for you. – have a financial ‘DATE NIGHT’

• Re-evaluate your budget once a year or when you have major changes (job, retirement, marriage, children, etc.)

Tips for Spouses• Agree on the budget & Work Together• Consider a miscellaneous category

for each spouse – • Don’t criticize if your spouse

is staying within the budget• Don’t spend it all –

just because you can

Gain all you can…Save all you can…Give all you can…

John Wesley