Part 1 – Making the budget.
In dividing the budgeting responsibilities, Ally and I defined our tasks as macro - the monthly and longer term budget and the micro - the everyday living expenses on the two weeks scale. She talks about the micro budget all the time - how to stretch it or how to prioritize it. But how did we make our macro budget? Here are the steps. You can do it this evening. And so you don’t get frustrated, round to the nearest $5. Round up for expenditures, round down for earnings.
1. Find out what you pay for. Put it in a spreadsheet. These are your fixed expenses.
a. Utilities usually include water and sewer, power and/or gas. A safe guess is about $100 per month per utility. Your water and sewer combined will be half that. So the total should be between $100 and $300.
b. Mortgage or rent. How much is it? Numbers I would call normal are on the scale of $500 to roughly $1000 per month.
c. Cars? How much do you pay for a lease or finance on your car(s). $200 to $500/month? More? Do you live in you car?
d. Insurance. How much is your car and home insurance? Insured alone on my own car, I was paying $100/month. With a wife, house and two cars, we pay $250.
e. Do you have a routine debt payment? Are you sure? No student loans? What’s your minimum credit card payment?
f. Phones, internet and cable I lump in together. In the last four years, for me these have varied from $50/month to over $250. With the all inclusive HD cable package and a data plan for your iPaidTooMuch 4gs, you could be at twice that. I’m judging you.
g. Any other fixed payments?
2. Here’s how to decide on your variable expenses and reduce the variance. This is our mirco-budget that Ally withdraws in cash every payday.
a. We give ourselves $100 each in allowance; I used to spend mine on cigarettes. Ally tithes. I quit, she didn’t.
b. Spend $100/week on food,
c. $50 week on gas (or transportation) – if you have a bus pas and it costs the same every month, you can call this a fixed expense and remove it from here.
d. $50/week on clothing and gifts.
e. Some people break this down differently and add an entertainment or “other” budget. Ours is our allowance.
3. How did we get these numbers? The truth is, we guessed and adjusted for the first few months. Our number is $600 bi-weekly. (*Ally note-it's actually twice a month on payday, not bi-weekly, which equals two less withdraws/year) I think it’s lavishly extravagant. For a single, non-drinking, non smoker, this micro budget could be on the scale of $200.
4. The hard work’s done. Now add all this up (don’t forget to count your micro twice) and subtract it from your monthly income. If you’re making less than you’re spending, go see a financial advisor. If you’re in the green, you’ve got options about improving your position.