There is a very simple way to begin managing your monthly budget. You start by pulling out a notebook or a legal pad and sit down with your current bills.
If you are married, the best thing to do is sit down with your wife and the two of you put everything on paper together.
List your house payment, phone, power, water, and any other utility bills first. You want to start with the expenses that run your household.
On things that maybe you don’t have a bill for, sit and think a little bit and estimate how much you spend per week.
Then, list any and all debts that you have from smallest to largest. If you have a personal secured loan to repay – you might want to list it first. Don’t let any of this depress you or anything as you put all of it on paper.
You are about to put a plan together to manage everything and pay everything off, one thing at a time.
List All Of Your Income Sources
Once you have all your expenses, including groceries, gas for vehicles and entertainment, it is time to list all your income sources.
Maybe you just have the one job, or maybe your wife works also and that creates two income sources. Whatever you do that brings in any income, put it down on paper.
You then need to compare your monthly income with your monthly outgo and see where you stand. Are you ahead of the game, breaking even every month, or falling behind before the month runs out?
So….Where Do You Stand On Paper?
Now that you have been able to look at these figures, what do you need to do to improve your situation?
Some of the best advice you will get financially on what to do at this point is to visit daveramsey.com. He has a website and a radio show and plenty of financial advice on Youtube.
Make Your Monthly Assessment A Routine
You will want to assess your monthly budget routinely. Doing it one time and not looking at it again will not help you.
This routine will help you improve over time and you will be amazed at what you see in your financial routine when you look at it on paper month in and month out.
You will see where you are getting better managing money and where you could handle your money better. And…I have news for those of you reading this post. We can all improve on something every month.
Emergency Fund
The emergency fund, like Dave Ramsey emphasizes, is also huge to try to put in place. You want to have a minimum of $1000 for an emergency fund.
Do your best to focus on doing this first. If you have to use part of this to handle something, then replace the money as soon as possible.
Don’t underestimate the importance of an emergency fund.
All Debts Can Be Paid Off
The best thing you can do for yourself is to believe you can pay off all your debts, and learn to have some patience with this philosophy. It will take time, but your lifestyle will be so much better with no debt.
List each debt smallest to largest on paper. Take a deep breath and realize you are making a plan to get out of debt. Don’t get overwhelmed.
Pick the smallest debt you have, and make a plan to pay it off as soon as you can. Figure out ways to make extra money and put all extra money possible into that smallest debt.
Pat yourself on the back, first of all for deciding to pay off all debts, and second of all when you pay off the smallest debt. As you pay off a debt, you can erase this outgoing money from your monthly budget.
Emotional Independence
Debt takes away our freedoms. We are emotionally tied to do doing whatever it takes to keep our bills paid and giving the lender the money we owe them.
As we reach the point that we pay off each debt, we are gradually gaining our independence back. We get back to a point that we can choose what to do with our time and our extra money.
We regain our emotional independence. Make no mistake, money is emotional. We make money decisions with our emotions more than we do with our logic. If we don’t control our emotions, our money controls us.
Have Patience With Yourself and The Process Each Month
Patience is the biggest key as far as smartly managing a monthly budget. When you start anything like this, you will feel awkward and may even feel like you are all over the place.
Give yourself some room for error and understand and believe that you will get better each month as you see things on paper.
As Zig Ziglar once said in a speech I heard, we can do a simple math problem in our head, like 2+2=4.
If you are given two three digit numbers to multiply, most of us would never figure that out in our head. But, put the problem on paper so you can see it, work it out and you find the answer.
The same principle applies to our monthly budget. We can figure out the problems and see the positives also and improve our lives on paper each month with a written budget.