A Simple Budget that Works

One word that no one wants to hear is “budget.” There are many articles on the subject. Most require sitting down and itemizing every dollar you spend. That makes me cringe just thinking about it. But there is a very simple way to create a budget that has worked well for me for years.

Over the last three to four years, a lot of Americans have seen the need to cut down and control spending due to the weak economy, and a budget is the best way to achieve that end. However, a budget can bring to mind a huge mountain you have to climb to get to the top. A simple budget is not hard to make or very time consuming. Within 30 minutes or so, you can have a livable solution.

Preparing for a Budget

All you really need is your last couple of bank statements. This will give you factual evidence where your money went. If you keep a checkbook register (does anyone still use this today?), you may want it. If you don’t have a bank account that you use to handle all your purchases and bill paying, you need much more help than this article can give. Otherwise, grab a legal or note pad and pencil.

Getting It on Paper

First, jot down all your recurring bills you know you pay monthly in a list. Mortgage, rent, utilities, phone bill, etc. Go through your bank statements and write down any others you may have missed. List what your payment is out beside each item. Include groceries on there. This is variable but recurring. Look for all the items you paid for groceries over the last month. Add them up and jot it down. If you fill-up
your car on a weekly basis, include it on your list.

Don’t write anything down that doesn’t get paid on a regular basis. If you pay any recurring quarterly or semi-annual payments, like auto insurance, divide them by four or six to get a monthly total. Everything else, we are just going to call miscellaneous.You can list all those if you want, but not necessary. Add all those things up. That is what you have to have in the account monthly to pay your bills.

Figuring It Out

Next, write down all your income for the month, net income or take home pay, not gross amount. Subtract your monthly recurring bill total from this amount. If this amount is more than 50-60% of your total income, go through your statements and find out where you can lower or eliminate some expenses.

What is left is all you have to live on for next month. Divide this amount by four. That amount is your weekly budget basis. You need to take 10-20% of this amount off your total. That is your cushion, for unexpected expenses. If you want to put any money in savings, take that weekly amount off too.

So now you know what you need to pay your necessities and what you have left to spend. Decide on an amount you spend weekly for little things, like lunch, snacks, little pick-up items and so forth. Keep this money, in cash, in your pocket. If your married with a joint account, both of you need to figure out this amount; $50-$75 or so is a good number to start with.

Now you can just go about your week with your cash spending money for the week. If you need to buy something that is $15-$20, remember all you have is your cash in pocket for the whole week. If it is something you really need, then debit it or write a check.

This way when you buy things you have to make a conscience choice of whether you really need or want something or not. Instead of just swiping your card everywhere without thinking about it, now you will think about your spending.

I have used this simple budget for many years and found it helps me live within my means and lets me save up for larger purchases. A budget doesn’t have to be set in stone. Every budget has to be flexible because there will always be unexpected expenses come up. With a plan like this, you will be better prepared when they do come up. Also, you won’t stress as much over money.