If you haven’t read 2nd Step To Winning With Money | Monthly Budget Planner please read it first. Creating a Monthly Budget Planner without knowing why is kinda like buying a plane and not being able to fly it.
As we said before, creating and sticking to a budget is the #1 way to head off your financial train wreck you are currently in. There was this family on a road trip vacation that was going through the mountains when their brakes failed. The father who was driving realized they were going faster and faster and there was a sharp curve ahead. His son was sitting beside him riding shotgun and his wife was behind him asleep. Both the dad and son were starting panic the closer they got to the curve and finally the dad said “wake your mom up…hurry!” The son said, “why dad, what can she do?” The dad said “nothing, but your mom has never seen a wreck like we are fixing to have!”
OK, that was a lame joke but it makes a good point. Your families brakes are out and you are headed for disaster. So it is time to wake everyone up and fix the brakes because you still have a chance to stop the downward financial spiral your family is in. Hit the emergency brake and stop now!
The Monthly Budget Planner
That is just a fancy name for a budget. It is defined by taking all your incoming money all your earned income no matter what the source is and assigning it to the budget. Pretty simple, yet only 40% of us even try to do it. Most don’t do it right. Most don’t stick with it. Most fail. Here is a non-exhaustive list:
- Child Support
- Social Security Income
- Retirement Income
- Side Hustle Income
Monthly budgets also include a list of all your outgoing commitments. This is defined by everything you must pay out every month to live. Such as:
- House mortgage or Rent
- Electric Bill
- Home Insurance
- Life Insurance
- Groceries and household items (toilet paper/paper towels/cleaning supplies/etc NOT A NEW TV) for the month
Notice there isn’t a car payment, car insurance, cell phone or cable TV bills in that list. Know why? Because it isn’t a necessity. That does’t mean I am telling you to cut off your cell phones and cable, or to sell your car….yet. It means first things first. You list out everything that is a must have like food for your family and a roof over their heads and electricity and water to keep them safe and healthy. Those come first.
Put It All On Paper
You can’t keep this in your head. You must put it on paper or use another method (we will get to that shortly). If it isn’t written down, it isn’t going to work. You have to be deliberate. You have to plan this out and put it down in writing for it to work. As smart as you are, other family members can’t read your mind and if they don’t know the plan it simply won’t work.
So every month prior to the month starting you have to do your budget. Every single month. A long time ago when I was young, we had to do this thing called reconciling our checkbook. We didn’t have an app to look and see how much money we had. We had to figure it out using this crazy thing called simple math. Crazy, right? I know! Anyway, you would have your starting balance at the beginning of the month and as you spent money you had to subtract that from the total so you would know how much money you have left. Doing a budget it no different.
Figuring Your Budget For The Month
Add up all your necessity bills/expenses and put that down on the paper or other method (it is coming, I promise). You need to write them down with the dates due. You need to separate them into the week of the month due. For example: Rent is due on the 1st of the month so it goes into week one of month. Electricity is due on 14th, it will go on week two of them month…and so on. Then on the other side of the paper put down your income. For example, if you get paid weekly, there should be four or five entries (depending on the month..March/June/September/December have 5 weeks in the month) of your estimated BRING HOME pay for your entire family. If both spouses work, then add the bring home for both. You are a team….as a team you put yourselves into debt…as a team you will climb out of it.
So on one side of the paper you have your necessity bills broken down to into the weeks they are due, on the other side you have your estimated bring home pay broken down into the weeks you get paid. Ideally your bring home pay will be a higher number than the necessity bills. If this is true, you will survive without any drastic life changes. If not, we have more work to do than we had feared.
Sometimes you have to save money from one week that your income is more than your bills for the week to be used in another week that your bills are more than your income. Alternatively, you can call your debtors/providers and work with them to change your due dates so they fit in the month and all weeks are at least payable with your estimated income.
Now you should be able to see easily that week one’s paychecks will be used to pay week one’s bills. Do Not Forget to add in grocery estimate to each week. Your family will thank you. You can now tell at a glance how much money you will have left over for each week. Since the numbers normally change every month, you have to write out this budget every single month. You will be changing out last months figures for this months updated bills as they come in. Yes, you have to actually open the bills, find the due date and add it to your budget.
Now comes the rest of your bills. Such as:
- Car Payments
- Car Insurance
- Cable/Satellite TV bill
- Cell Phone bill
- Gambling Habit (just kidding…it is budget time..no gambling)
Add those bills in and see what happens. Do you have enough remaining each week to cover these costs after paying the necessity bills?
Expenses Other Than Necessity Bills
I will first assume you have enough money to pay both necessity bills and the luxury bills. Yes, a cell phone is a luxury. If you do earn enough income to pay these bills, then you still have work to do. You need to work to get these bills down as low as possible. Shop cell phone carriers to get a lower payment, shop your car insurance to get lower premium, sell your car and buy a cheaper car. Why should you do this when you can “afford” it? Because just because you have the income to pay for it, doesn’t mean you can afford it. You haven’t saved money to cover emergencies. You haven’t invested into retirement savings. Nor have you even thought about your children’s college savings
If you do not have enough money to pay both necessity bills and luxury bills, you have to make drastic life changes. You will need to sell your car to get out from under those payments and buy you a $1000 hoopty that will get you to work and back, cancel your car insurance and just get liability on your brand new junker, turn off your cell phone and get a prepaid cell phone with just minutes/no data, turn off your cable TV and get some rabbit ear antennas to watch the local news, get rid of your home internet, cut down your grocery bill and just live on ramen noodles and beans/rice. Why? You can’t afford these luxuries and you have to take control NOW!
That two paragraphs above are the key to your financial freedom. You have a budget and now you can clearly see where you stand. You can’t hide from it any longer. Would you rather pay that $100 cable bill and $100 cell phone bill and not save for retirement? If so, you my friend are a fool. Just like I was. Here is why:
- You prefer items rather than financial freedom
- You want to look cool rather than live stress free
- You don’t care about reality, you prefer living in your own little dream world
- You don’t care about your family, because you haven’t saved one dime for their future…but you have that new iPhone
- You haven’t saved one red cent for retirement
- You haven’t saved one red cent for an emergency fund
- You haven’t saved one red cent for your childrens college
I could go on and on…but you get the idea. Look at it this way. If you didn’t have just that cable bill and you saved that $100 a month into a Roth IRA (individual retirement savings account), you would have, on average:
- $21,058.48 in 10 years
- $86,462.93 in 20 years
- $289,599.22 in 30 years
- $920,509.70 in 40 years
Hope you love watching TV, because over your lifetime, if you had read books from the library, you would have been a millionaire when you retired…just from not paying for cable. Multiply that by yours and your spouses cell phone payments for having the latest and greatest phone every two years those numbers would have been:
- $63,175.45 in 10 years
- $259,388.79 in 20 years
- $868,797.66 in 30 years
- $2,761,529.11 in 40 years
Yep….you would have had 2.7 million dollars if you had invested $300 per month into a retirement account rather than watching cable and having new phones with all the data. Yes, your cell phone service costs on average $100 per month each and cable/satellite is $100 per month, on average. Congrats…you just wasted $2,700,000 dollars over 40 years on crap.
Now, Back To The Budget
This budget must be written out, printed out and agreed to by you and your spouse or girlfriend…or both. lol. Just kidding, if you are married and have a boyfriend or girlfriend on the side, you have more problems than a budget can fix. Let’s look at the question of how you physically do the budget now. There are 3 ways:
- On Regular Notebook Paper
- On a Spreadsheet on the Computer
- Online Using Software and/or an App With Your Phone
Or, you can use a combination of 1, 2 or all 3 of the methods. Whatever makes you happy. As long as you get it down on paper/screen/etc where you can look at it every day, then I don’t care. It all works. It has to be available to all members of the family where they can see and touch the budget. Why? Because if they can’t see and touch it, it isn’t real. It doesn’t exist.
In the following page linked below, I will show you how we do it. We tried several methods and this is the one that worked for us. It also involves the Dave Ramsey Envelope System that we modified to be cheaper and work for both females and males without the embarrassment of carrying a purse. This is an envelope system budgeting method that utilizes budget envelopes to carry CASH in that includes only the money for different parts of your budget such as money for groceries, gas and money allotted for cleaning supplies and petty cash. It is an amazing system that makes the whole thing work.
When you handle cash instead of a credit or debit card, you know that one that cash in the envelope is gone, you don’t have anymore. So you spend less. You hold onto it. It is too easy to swipe a card because it isn’t money…but pull that $100 bill out of the envelope and hand it to someone to pay for something and it hurts. Trust me.
So read about what we found to be the best way to put the budget down and know that we came up with the most economical way to do it…..yep…we were broke….we had to find a way to do it cheap. We did and we are sharing it with you in the link below.