Have you ever heard the phrase “dress for the job you want, not the job you have”? This applies to budgets as well. Budget toward the life you want, not the life you have. You’ll get there (and a whole helluva lot faster than with no budget at all).
Imagine if the large corporations of the world were ran without analyzing their numbers and projecting revenue and expense trends or maintaining a proper budget. They probably wouldn’t make it long – or at least successfully. Your budget is no different – although on a much smaller scale. Darn the luck.
I treat my money like it is a business. And it IS a business, because my money is working for me, not the other way around. I take my finances and my early retirement very seriously.
That being said, creating a budget is not fun. In fact, it sucks.
It sucks even more when there’s less coming in than there is going out. Which, incidentally is exactly why we need to budget and like an adult.
Variable income? That’s okay! (and yes, you still need a budget)
Most of my own income is variable, and instead of focusing on how much money is coming in (or not coming in some months) I focus on what I CAN control.
Small expenses add up to big expenses which adds up to a whole lotta BROKE.
Steps to Managing Your Budget Like an Adult
1. List all forms of income. Take an average of how much you bring in each month (or the actual number if it is consistent). Always use the net portion (after tax) of your income instead of gross (before tax). We want to know exactly what we have to work with after Uncle Sam gets his cut.
If your income is variable this will be more difficult. Use an average and remember to review and to tweak it each month.
2. List your fixed expenses. These will be your mortgage or rent, your utilities (read how average billing for your utilities is great for budgeting), your car payment(s), insurance and retirement savings, cell phone plan and internet etc. I also include gas for transportation as a fixed expense. Yes it varies, but a good estimation will suffice. (and we have to have gas)
3. List your variable expenses. This includes entertainment (concert tickets, movie theaters, cable), eating out, clothes shopping, gym memberships, coffee on your way to work etc, and for me I have to include my monthly audio book subscriptions (I have three, yikes!).
Variable expenses are what you have the most control over – and also where you’ll do your most fervent budget cutting. Don’t get depressed though, we dive into ways to reduce both variable AND fixed expenses in our FINANCE section of our website.
By living as below our means as possible, we have more control over our money. This doesn’t mean we have no fun at all, we are just more creative with our fun.
4. Do the math. Figure out what you have left after taxes are taken out of your income, after your fixed expenses and your variable expenses are paid. Is there anything left? How much? Is it enough?
If that answer is yes, YAY!
Now go make it rain in your savings account.
If that answer is no, then Houston, we have a problem. If your income is not enough to cover your expenses, head back to #3 above and dig deeper into your variable expenses.
Do you really need to go clothes shopping as often? Could you find some of those new (to you) clothes at a thrift store instead?
Do you really need to go out to the movies, or could you wait a while and pick up the Redbox when it comes out instead?
Do you really need to pay $60 per month on a gym membership, when you could go to the park to run laps and do pull ups on the monkey bars instead?
We are being innovative here, and working on creative ways to swap this for (a much cheaper) that. And even if you DO have enough money at the end of your month, that doesn’t mean a few items can’t be tweaked to give you even more money. We like more money.
5. Finally, you’ll want to sit down at the end of each month and see where you sit. Were your projections accurate? Do you need to bump up the gas for transportation portion of your budget? Make your tweaks and budget cuts.
Treat your budget like a business. A successful business.
*How We Joined the 800+ Credit Score Club
*Why You Need to Stay a Month Ahead of Your Expenses
*9 Tips to Becoming Debt Free
*Better Budget: How to Live On ONE Income, Tips and Budget Ideas
*Building Wealth: 401(k) vs. Roth IRA – Know the Difference and Your Options
Join us here at Heart • Hook • Home and get CROCHET tips and DIY ideas, YARN hacks and FREE crochet patterns + yummy new RECIPES along with FAMILY and HEART + BUDGETING tips sent directly to your email!