Saturday, November 6, 2010

Setting up the Cash Budget

Yesterday I set up our cash budget for the next two weeks and thought I'd do a post about how I actually do our budget each time. So I'll do a "pretend" budget as an example.

Income: $1,000
Balance in Checking account: $1,100

Bills due this two week period: $550
Extra expenses this time period: $25 haircuts, $30 Parenting conference

So I take the balance of money we currently have to work with: 1,100 and start subtracting our expenses:
-550 bills, -$55 extra expenses. That leaves me with $495 to work with for living expenses and goals. I like to do it this way because then I know all my bills/expenses will be taken care of an I won't have anything that won't be paid on time.

Goals: (These are some examples of goals that you may have)
-Pay off debt (10,000)
-Save for Christmas gifts ($300)
-Save for an Anniversary get away ($450)

Keeping your goals in mind and the order that you're needing to deal with them, then set up a reasonable cash budget with the remaining amount in your account. Be sure to try to keep some set aside for each of your goals.

Buffer for the checking account: $100

Cash Budget:
Groceries: $75
Gas: $75
Personal: $50
Entertainment: $40
Clothing: $0
Fun Money: $30

So after setting up my cash budget and weighing what we'll need or won't need for the next two weeks, I have $125 left to use.

Now I designate it towards the goals in order of importance and time frame.
Debt: $75
Christmas: $25
Trip: $25

After I've set up my budget I shouldn't have anything that wasn't accounted for. It's up to you and your spouse to decide what's important and what your priorities are. Notice that in this budget I had to say $0 for clothing in order to have money to put toward our "goals". I also had to make the budget amounts smaller then what they would've been if we didn't have to save for special occasions. The sacrifices and cut backs are totally up to you and it's up to you to live within the boundaries you set in your budget.

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