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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How to Develop a Purposeful Plan for Giving Away Money

If you have found your way to this article, you most likely have a charitable heart and enjoy giving away money to a church, charitable organization, favorite cause or the girl scout who shows up at your door selling cookies. But have you ever thought about how you give away money? Do you give purposefully or haphazardly as opportunities pass in front of you?

giving away moneyDeveloping a purposeful plan for giving away money might seem silly. Perhaps you want to give wherever and to whomever you like without feeling constrained by a plan. There is great freedom in that philosophy. However, as I’ve found out over the years, there are also great dangers.

Putting together a purposeful plan for giving away money is a fundamental exercise you should go through to have success with your personal finances.

We try really hard to make a monthly budget that works. We plan for how we will pay for college and support ourselves in retirement. So why would we ignore this area of our finances where a lot of money could potentially pass through our fingers over the course of a lifetime?

Why We Got Purposeful

My wife and I both enjoy giving away money to our church and other causes we believe in. However, as we became more financially healthy, we realized we had a greater responsibility to manage our giving wisely. We decided to get purposeful with our giving for several reasons:

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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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The U.S. Federal Budget Breakdown For Your Tax Money in 2016 – Infographic

With the first primary elections just a few short months away, it’s been interesting to hear the would-be presidential candidates take on taxes. Some are proposing to tax the rich at a higher rate to fund the federal budget while others highlight the virtues of cutting taxes on the middle class. Once again it appears the “take-more-money-from-the-people” or “give-money-back-to-the-people” debate will be a central theme in the 2016 presidential race.

monopoly luxury taxGenerally speaking, we like to keep the money for which we work so hard. Nobody in my circle of friends is saying of a tax increase, “Sure, I’d be happy to…take another 5% out of my paycheck to fund the government. I don’t mind.” Know anyone who thinks that way? I don’t.

Regardless on how you feel about taxes, they do allow our government to function. It’s every American’s responsibility to pay taxes into the government’s budget. If you don’t well, let’s just say there could be some serious consequences (i.e. big fines and/or potential jail time). After several years now of living with a CPA in the house, I’ve come to appreciate (#fear) the tenacity with which the IRS takes its job.

Have you ever wondered where your tax dollars really go though? How does the government use your tax dollars in the federal budget? The people at Community Tax have researched that question and put their findings into the following infographic.

2016 U.S. Federal Budget Breakdown

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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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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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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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This One Trick Started Our Process of Doing Successful Budgets

successful budgetsThe first attempt we made at budgeting years ago was a nightmare. Our intentions were good and what we did seemed logical at the time. However, after a few short months it became apparent we could not put together successful budgets.

For those first budgets, we calculated what we wanted to spend per category for the entire year. These numbers were based on our income and what we knew (or thought) our expenditures would be. The next step was to divide by twelve to get the budget number for each month.

Seems easy enough, right?

Well, there was one big problem that showed up rather quickly that forced us to conclude this type of process was not going to work.

Every Month Is Not The Same

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How to Love Paying Bills and Going Christmas Shopping

paying billsThree weeks ago I’m standing in Target crossing off the list Christmas gifts we had already purchased. My wife, who had been looking at some kid clothes, comes up to me and says, “I’m having so much fun Christmas shopping this year!”

Amazed at her enthusiasm I said, “Who are you and what have you done with my wife?”

After giving me the duck face, she replied to my quip, “It’s just so much more fun when you use cash when paying bills and purchasing the.”

That comment was in my top 5 moments from this past Christmas. Knowing our money management system was enhancing our relationship and making such an emotional impact on my wife was priceless.

If you are wondering how we had the cash to pay for all our gifts, it’s not because we allocated that much more in our December budget than normal. We started saving for Christmas in January, using a tried but true concept known as a sinking fund.

The Sinking Fund Theory to Paying Bills

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Ending the Money Fights (Part II): Relationships Blossom When Couples Budget

This is part two of three on how couples can resolve the constant fighting over money.

Men's Shoes

My breakthrough occurred while shopping for these.

Last week I outlined how communication is the first step to ending the money fights in a relationship. Unless couples share their values, goals and feelings with one another, they will continue to bump heads over how their money is spent. It’s inevitable. When couples don’t share the same vision the relationship falters.

When my wife and I began to seriously and openly talk with one another about money, our financial life began to change. However, the unity didn’t result from us just talking about it. We knew there had to be an action step, something that would cement the ideological bonds that were forming through our discussions. That step came in the form of a joint commitment to prepare and live on a budget.

Ugh…budgets…I know the feeling. Unfortunately many people have had terrible experiences with them. This leads them to create excuse upon excuse as to why they don’t need to prepare one. They are essential though, if couples are going to have a breakthrough. I know in our lives, the budget did more to move us forward than anything else.

Step #2: Work on a Budget…Together

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4 Reasons Your Budget Isn’t Working

budgets that workSo, the budget doesn’t seem to be happening for you each month? Can’t figure out how to do budgets that work?  Well, take heart. At least you are trying. That’s more than can be said for a good portion of the human race who just make excuses for why they don’t want to attempt one.

If you are having trouble, that’s OK. Budget success doesn’t happen overnight. It took my wife and I six months of making adjustments and having emergency budget meetings before ours began to settle down and become consistently stable from month to month.

Budgets That Work

This I know with complete surety, developing a quality budget changed our life. But it wasn’t without some missteps along the way. In those early days, I found these four things wrecked our budget every month.

1. We left items out of our budget

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