After reading that word how do you feel?
Happy? Cheerful? Full of eager anticipation? Probably not.
Instead of talking about budgeting today I'm going to talk about monthly financial planning. It's way more exciting than budgeting.
Also, because money causes issues in so many marriages, I am going to break monthly financial planning down into four easy steps.
Step 1: Estimate
The first thing you need to do is guess. Guess what how much money you are going to make/receive this next month and guess how much you are going to spend.
Identify where you think the money is going to come from (your job, gifts, panhandling, whatever). Identify where you think your money is going to go (groceries, gas, rent/mortgage, utilities, entertainment, etc.).
Now subtract what you expect to spend from what you expect to make and if that number is greater than zero designate for what purpose you are going to save that money (if it's less than zero figure out how you can spend less). Vacation, fixing the car, dental work, a new computer, whatever. The point is that when you are done when you add up your savings and your expenditures they should equal what you expect to make.
Step 2: Keep Track
Through the month keep track of what money you are making and what money you are spending. You can do this in a thousand different ways. Cami and I use Microsoft Excel, others use a notebook and pen, some us Quicken or Mint.com. It doesn't really matter, whatever works best for your family.
The important thing is to keep track. If you do it every couple of days it will be much easier than sitting down and doing it at the end of the month. Plus it gives you an idea of where you're at at that moment and you can then make adjustments to your spending if needed.
Step 3: Evaluate
At the end of the month add up all of the money you made. Compare it to what you estimated you would make. Were you close?
Now add up all of the money that you spent. Compare it to what you estimated that you would spend. How close are you?
Finally, add up what you were able to save. Compare that to what you estimated that you would save. And?
Don't worry. The first three months you probably won't even be close but by that fourth month your estimates will be super close to your actual expenses. Just be patient. And DO NOT stop because you weren't close the first time. No one is.
Step 4: Do It Again
That's it. Repeat steps 1 through 3. Do this every month until you die or have the money to pay someone else to do this for you.
The important thing in all of this, and the real reason that we should all do a monthly financial plan, is that we tell our money where to go. We need to stay in charge. Having a monthly financial plan gives us that control.
For more information about financial planning I encourage you to visit DaveRamsey.com and see if any of the resources he provides might help you.
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