Hope for your financial life and beyond

Always Plan a Budget Around These 5 Expenses First

The first time I sat down to plan a budget with my wife, we didn’t know where to start. There were literally dozens of expense categories popping into our head at once. The whole process seemed a bit overwhelming.

plan a budgetAt some point it dawned on us that we needed some clarity about the process. We needed to narrow the field and focus on certain priorities in the budget. By doing that, it became obvious what areas of the budget we needed to focus on first.

What we found was that there are five fundamental expenditures to focus on when you plan a budget. Without them, any person would have a difficult time surviving. Coincidentally, these categories will also be some of the most expensive budget items each month. Those two reasons alone – basic survival and cost – should justify why it’s important to start with them when you plan a budget each month.

Five Basic Categories When You Plan a Budget

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The Ultimate Guide on How to Make the Best Monthly Budget

I’ve written a lot over the years on how to make a monthly budget. It’s really been important to me because creating and successfully living on a budget turned our life around. My wife and I would not be where we are financially had we not admitted the problem and took the time to learn how to budget.

Today I’ve decided to pull all my knowledge about doing a monthly budget into one post. And I’ll tell you right now, it’s going to be a long one. But it’s going to be really helpful. If you are new to budgeting, struggling with budgeting or a veteran at budgeting you’ll learn something from this post that you can apply right away.

To help with organization, I’ve divided the post into several segments. Here is what you can expect to find:

  • monthly budgetWhat are budgets?
  • The real reason you need a monthly budget
  • Why people resist budgets
  • The one tip that started our success
  • The basics expenses of a monthly budget
  • What percentage to spend in each budget category
  • How to make your monthly budget zero-based
  • What to do with the left over budget money
  • Why your monthly budget isn’t working
  • Three helpful strategies for spending
  • Budgeting resources that work

With that as our outline, let’s get started.

What is a Budget?

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How to Prioritize What’s Important When You Make a Budget

I remember the first time my wife and I really tried to make a budget. So many expenses were coming to mind it was difficult to prioritize which ones were most important. We messed up many things in that first month’s budget and felt really frustrated at our efforts.

make a budgetIt didn’t deter us however from trying again…and again…and again. We found that after several months of trial and error certain expenses always drifted to the surface first. It was apparent that we were drawn to some expenditures more readily than others because they represented fundamental needs for our family each month.

So what expenses go first when you make a budget? Then how do you determine what comes next? Today I’m going to outline our five-step thought process as we make a budget each month. Hopefully it will give you some direction as you try to figure out how your hard earned dollars will be allocated.

Process to Make a Budget

When you begin the process of putting a budget together, start with the highest priorities and work your way down. It should look something like this:

Budget Priority #1 – Necessities Above All

Put simply, you have to survive. Nothing else can happen in the budget before your basic needs are taken care of.

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The Best Option for the Extra Budget Money at the End of the Month

Perhaps you’ve had this experience with your monthly budget money:

At the beginning of the month you allocated “X” amount for a particular budget category. Due to clipping coupons, noticing that sale item or exercising some intense discipline, you didn’t end up spending as much for that category as you had planned.

budget moneyPut another way you budgeted $600 for groceries but only spent $525. You thought that dress would be $100 but you lucked into a half-off sale. There was no car maintenance for the month so the $75 you earmarked for that wasn’t used.

What do you do with that extra money? Where does (or should) it go?

It may seem like a silly question but there are actually some issues here that need to be addressed. I can think of three different options for your extra budget money at the end of the month with one of them being the clear winner in my book.

Options for the Unspent Budget Money

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5 Budgeting Tips to Save Money for the Holidays

Want to save money shopping this holiday season? Today’s guest post by freelance journalist Ivan Serrano begins our countdown to Christmas with these five budgeting tips.

With Thanksgiving only a week away, Americans are already shopping for the holidays.

budgeting tipsAccording to the 2014 Accenture Holiday Shopping Survey (.pdf), the average American is expected to spend $718 on holiday gifts alone. In addition, one-fourth of Americans plan to spend more on holiday shopping this year than they did in 2013.

While many Americans are planning to spend more during the upcoming holiday season, consumers are still looking for ways to save. Ninety-six percent of Americans believe discounts will be important for their purchasing decisions this year according to Accenture.

As you plan for the upcoming season, here are five tips to help you budget money for the holidays:

Set a short term savings goal for the holidays

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5 Ideas for a Kitchen Remodel on a Budget

Want to remodel your kitchen but are worried about the costs? In today’s guest post, Tim Smith from Modernize.com shares ways to get the kitchen look you desire while keeping costs low.

kitchen remodel on a budgetWhile everyone may dream of creating their ideal kitchen, a massive overhaul is often too expensive to consider for most people. However, budgetary constraints do not have to keep you from finally having your dream kitchen. Instead, you just need to think about a big remodel in little ways.

Doing a Kitchen Remodel on a Budget

To get started, here are five simple tips to make your big kitchen remodel a success little by little.

Focus on problem areas

When doing a kitchen remodel on a budget, it is important to set priorities. While there are a lot of things you may want to change, focus on the things that are most pressing.

If your countertop is broken or out of date, think about putting most of the budget toward that. Alternatively, you may need new appliances or updated flooring. You will probably only be able to splurge on one or two areas, so be sure to make them count.

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The Best and Worst Places to Save Money in the Budget When Getting Out of Debt

Lets assume that you’ve finally decided getting out of debt is a priority and are looking to save money in the monthly budget by cutting expenses. Where do you start?

getting out of debt

The Headache Factor Equation will help you determine which spending categories to cut first.

Not all categories are created equal. In some you can find money savings quickly. Others are going to take a little more time and effort. Some budget cuts will be easy to endure while others might lead to some family frustration at the lack of spending for that category.

In order to better identify the best places to save money in the monthly budget I’ve created the “Headache Factor Equation.” This formula takes into consideration three factors that are each scored on a scale of 1-5, with 1 being positive and 5 being negative. The lower the total cumulative score of the three factors the better when determining where to start saving money first.

The three parts of the equation are:

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Why I No Longer Hate Making a Budget

Today I’m guest posting and commenting at personal finance blog Canadian Budget Binder. I’m talking about my journey from hating budgets to loving them. Click the link below to join me there.

mended heart

My heart has been mended into loving budgets.

Fifteen years ago you could not have twisted my arm enough to make a budget. It wasn’t going to happen. My wife had tried several times making a budget but I hadn’t given any input and I certainly didn’t think one was necessary.

It’s safe to say I hated them.

Click here to continue reading at Canadian Budget Binder…

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How to Make a Zero Based Budget in 3 Easy Steps

One task that may not be apparent to first time budgeters is to create a zero based budget. My wife and I had tried to make a monthly budget before but for one reason or another, our budgets never seemed to work. Putting this step in place helped us lesson those failures and move us towards a place of continual success with our budgets.

zero based budget

The process of putting a zero based budget together is not hard to understand. Like any other budget it does require some planning and attention throughout the month because you might have to tweak some numbers here and there as life happens. In my opinion it’s the best type of budget to put together as it leaves no room for money to go unaccounted for.

What Is a Zero Based Budget?

There are a few simple steps to take in order to make a zero based budget.

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4 Sneaky Ways to Save More Money and a Giveaway!

Enjoy this guest post (and giveaway!) by Brent from VOSA. Brent’s a world record holder, inventor, engineer, entrepreneur, world traveler & eternal optimist. You can read more of his writing about personal finance, entrepreneurship and travel at VOSA.com.

shoes and tv

Do your personal finance habits have you lost?

Left sock, right sock. Left shoe, right shoe. Right shoelace, left shoelace.

That’s the routine I’ve followed when putting on my shoes for as long as I can remember.

It’s so engrained into my mental and muscle memory I literally have a hard time doing it any other way even when I try.

Now I’m sure there are some behavioral psychologist reading this saying “claaaasssiiic O.C.D.”.

O.C.D. or not, habits like this rule our lives more than we know it.

Just think about how you put on your shoes, or the first three things you do every morning when you wake up, or how you respond when someone ask you “how are you?”

Chances are, that you too, have some standard routines that you weren’t aware about until just now.

Don’t get me wrong, habits are a great thing. They allow us to save mental capacity for when we have to make bigger and more important decisions than which sock and shoe I should put on first or weather you should brush your teeth before or after your shower in the morning.

Studies have proven that willpower is a finite element that you can exhaust over the course of a day.

This is why you’re more likely to eat that piece of cheesecake at 11 PM after a long and stressful day compared to 9 AM when you’re putting out fires and savings lives at your day job.

How Habits Form

Knowing how habits can govern your actions can help you financially. In this post I’m going to focus on four different sneaky ways to use habits to save more money.

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Why a Travel Budget Should Be a Must For Everyone

travel budgetAh…the joys of having a travel budget. It’s 1:00 pm in the afternoon and I’m doing something so commonplace in today’s world it hardly seems extraordinary anymore, except maybe through the eyes of a child. I’m at an airport watching planes take off and land. Boring, huh?

Except this is no ordinary airport.

I’m standing on Maho Beach…in St. Maarten…with dozens of tourists…and a fenced in Princess Juliana International Airport just a few yards behind me.

Out over the water a tiny speck appears on the horizon. “Ahh…right on schedule,” the person next to me says. As it moves nearer, the onlookers at the beach scramble into position, iPhones in hand recording the moment. Closer and closer it comes. “Ooh this is a big one,” someone exclaims.

I dig my feet into the sand to sturdy myself. Right now, I’m realizing how exciting it is to have a travel budget.

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