Creating a Budget

When creating a budget, there are some guidelines that I have found helpful.

Brainstorm Category Ideas

When deciding what categories to include in your budget, you will want to include the entire family. Find out what each member feels is important. Learn what each person may want to spend money on. The more the members of the family feel heard, the more likely each one will be to try to work within the budget.

Categorize fixed vs. flexible

Once you have your budget categories listed, determine which ones are fixed. What expenses remain the same every month and are not changeable? These would be things such as your house payment, other debt payments, utilities, etc.

Prioritize Flexible Expenses

Once you have separated your categories into fixed and flexible expenses, you will want to look at your flexible categories. You may find it helpful to prioritize these. Which one does the family feel is most important to have in the budget verses what could they do without if they had to?

Assign Fixed Expenses

At this point you should know your monthly take home income. First focus on your fixed expenses. Write in next to the house payment exactly how much you need to pay out for that on a monthly basis. Do the same with all of your other fixed expenses.

Assign Flexible Expenses

Once your fixed category expenses have been assigned a dollar amount, determine how much money you have left each month to assign to the flexible categories. Again, together as a family, determine how much money to assign to each category every month.

Take the one you assigned as top priority and decide how much to put towards that on a monthly basis. As you work through these categories you may find you need to adjust the amounts put into first flexible categories to make more money for additional categories.

You may find that you do not have enough monthly income to meet the desires of what you are wanting to purchase. This is where you have to decide that a category may not be funded in your budget at this time.

During the times of not being able to fund a category, we have left it in our budget to remind us that it was a category we wanted to have money for someday. We just left the dollar value at zero until we could fund it without spending more than was coming in.

You may find that there is no extra money for any flexible accounts. Your income may be just enough to cover the fixed expenses. We have lived like this in months past. This does not make it easy.

Determine to not live beyond your means. Determine to get debts paid off. Once you pay off debts you have that money that is now freed to begin to put into your flexible expense categories.

When creating a budget...

* involve the entire family
* focus on fixed expenses first
* do not fund your budget for more money than is coming in
* determine to stick to your budget

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If you have never done a budget, here are the categories that in our budget to give you a starting point of what items you may want to include in yours.

tithe, savings, electric, water, sewer, heat, trash pickup, vet, gas, clothes, mortgage

Cell phone/ Internet: (We do not have a home phone line.)

Food & Household/ personal: (This includes all of our groceries and eating out. It also includes all personal hygiene items, toiletries, paper products and cleaning supplies.)

Pets: (We fund the food and all needs for our pets, except fixed vet bills, from this category)

Car Expenses: (This money is saved and used towards car repairs and the purchase of a future car when needed. We buy our cars on a cash only basis so it is important to not dip into this category as it needs to build up quite large in the preparation of needing another car.)

Insurance (not health)

Health: (We only have major medical for insurance. This category funds that fixed monthly expense. It also covers the more flexible expenses such as all routine doctor visits, dentist visits, prescriptions, etc.)

School: (Our children are enrolled in private school. This funds the fixed tuition in addition to all school supplies and other needs related to school. It also covers all of our expenses related to homeschooling our daughter.)

The following categories are in our budget but are not able to be fully funded at this time. What we have chosen, as a family, to do instead is to create a misc. category that gets funded minimally on a monthly basis. We then determine which of these categories will spend that money at any given time...

Vacation, Gifts, Home Improvement, Adult Allowance
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Notice that we have made our tithe and savings a line item in our budget. To us, these categories are considered fixed expenses. They are not optional.

We have spent years defining and refining our budget. We still re-evaluate it every few months to keep it the most current it can be.

What I have shared here is just the personal way budgeting has worked for us.

Dave Ramsey and Crown Financial Ministries provide many tools, resources and budgeting information. You can learn what percent of your income certain expenses should be. You can find other sample budgets. They have a wealth of information available when it comes to budgeting.

If you have created a budget, stick to it. If you do not have a budget, it's not too late to create one!

Where are you when it comes to living on a budget? Is there anything you'd like to add or mention about creating a budget?