What to include in your Monthly Budget?
When we discuss budgeting, many people conjure up images of spreadsheets, calculators, thoughts of arguing with their partners/spouses, and other assorted distortions of reality. It is true that our brain can find the worst possible outcome for a given scenario but we want to focus a bit more on what ACTUALLY happens.
Budgeting is just a method of accounting for income and expenses over a given timeframe. At Blue Collar Budgets, we teach a very simple and non-shock inducing method of writing down each and every expense in a notebook. By going through the simple motion of writing down each and every expense people are far more likely to remember those transactions in the near future, and it may just curb some of the instant gratification our current culture forces us to desire.
Creating a budget seems overwhelming and it will take time/effort at the beginning, but over time it will become less of a burden and become easy. My wife and I’s first “budget meetings” took about an hour each month, but once everything is setup it takes 10-15 minutes. If you cannot spare 10-15 minutes once a month to ensure you will have a Financial Future, I am not sure how to help you. But since you are reading this blog on my website, I am certain I can help you achieve Financial Fitness!
There are many questions about what items do you include in your Monthly Budget. Do I/we include car insurance, even though I/we pay twice a year, do I/we include property taxes paid annually, do I/we include the soda and pack of gum bought while pumping gas? The short answer is ‘Yes’. In order to know your current financial situation, the only possible answer is to include every single expense you have; the insurance/taxes can easily be broken down into monthly payment costs by dividing the annual cost by 12. Even items that might be on automatic payments need to be included (utilities, credit card minimum payment, medical bills, child support, alimony, etc.)
For the first month, the goal is to try and get every single expense written in your notebook, and then review and categorize similar expenses. For instance, buying soda/gum and ordering pizza could be classified as ‘dining out’ or perhaps you want to capture all food related items, including groceries, under a general ‘Food’ category. Either one is fine at the beginning. We are trying to figure how much of your monthly income you are currently spending. The average U.S. family currently spends approx. 8% more than they bring in each month. This is a staggering statistic and the main reason behind starting Blue Collar Budgets. I realized people are in far more debt than they realize, and the past has proven that to be a very bad idea as the slightest economic hiccup causes complete chaos!
The goal of having a monthly budget isn’t to say: you can’t buy that car, you can’t buy those shoes, or you can’t go out to eat at a nice restaurant. The goal is to physically show you your income and how much of that income you are spending. The Financial Fitness Quotient provided by the Grade My Budget application on the website provides a quick gauge to see how you are handling your finances. Unfortunately, most budgets will receive a D or F once a monthly expense notebook is complete. This is okay and is to be expected by an “Average monthly budget”, but with hard work and determine we can definitely raise that grade! It is absolutely critical to get each penny spent during the month written down; without this information you are simply guessing at your Financial Health and Financial Future!
Blue Collar Budgets takes time and energy to understand your current financial situation through a graded budget. By starting a monthly budget now you will give yourself a head start in the right direction!
We cannot know the path to our goal, unless we know our current location first!
