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Tips to Build Your Budget

Did you have more month left at the end of your money? Do you have more bills than checks? Build your budget from the ground up!

Balancing your income and expenses can be challenging.  But budgeting for your family is the foundation of a sound financial management plan.  You wouldn't start building a house without a good foundation would you?  Managing a family budget can allow you to discover ways to put your money to better use, such as debt reduction, retirement savings, etc.  The hardest part is having the discipline to actually do it! 

house plan
House Plan

Before you started on a foundation for your house, you'd need to start planning!  Before you develop your budget, you need to think about your family goals and the standard of living your family desires.  Get everyone in the family involved in this process.  Open communication is important in this process.  I didn’t always appreciate the long-term planning my parents worked on – they were saving for me to go to college, and I wanted more clothes!  But now, I see the wisdom in their hard work and planning! 

After getting a house plan, you need to work on the site.  Does it need prep work? What kind of foundation do you need?  When establishing family goals, try to be realistic and consider your income.  If you go all out and set family goals that are too unrealistic, frustration and resentment can set in.  What kind of goals should you set?  You’ll probably need short-term goals and long-term goals.  If you have a toddler, then college savings could be a long-term goal.  But if you have a high school senior, college savings should be a short-term goal! 

future homesite

Future Home Site

Short-term goals = less than a year away (for example - a new appliance, trading in a vehicle, a good basketball goal for your basketball player, signing up for travel ball teams, etc.)

Long-term goals = 5 or more years down the road (saving for college, retirement, paying off the mortgage, etc.)

Standard of living is mostly about perception.  What is important to your family? Do you want to drive a $35,000 vehicle or a $5,000 vehicle? Do you want to live in a $200,000 house or would you be happy in a $80,000 house?  Do you want to dine out frequently, or just on occasion?  Do you need to wear certain brands only, or do you plan on shopping for less expensive brands?

framing in house
Framing inside house

So you've gotten the foundation. It's time to frame the house.  The builders will look back at your plan.  Now that you know where you want to go, it’s time to look back at what you’ve been spending.  If you have spending records, your family budget will be a little easier because you already know what you spend on what.  If you haven’t been keeping records, it may be more difficult.  Now is the time to start keeping track of expenses if you have not been doing that. 

dry wall
Dry wall

Once the framing is done, then walls start going up.  It's taking shape! Start by listing your fixed expenses – mortgage/rent, payments, insurance, child care, internet/tv/subscriptions, etc.  Then look back through utility bills and other statements to get an idea of what you spend.  Then you need to add expenses that can vary each month such as groceries, dining out, clothing, entertainment, home maintenance, etc. 

cabinets framed in
Cabinets framed in

Now you're getting to see some real progress on the building.  Make a plan for your spending is next!  You can use the one is Shape Up Your Spending , an app such as Good Budget or Mint, or you get use a variety of tools like these from Wisconsin Extension.

Once you have your budget in place, use it!  The first month may be challenging.  At the end of the month, go over what you spent.  You’ll probably need to make some tweaks!  Then, use the new budget for the next month.  It will get easier as you get better managing your expenses.  The first few months may take some work.  I had a difficult time getting used to a budget.  I often felt deprived.  But now, I’m so glad I did.  What seemed like a big deal at the time (eating out for lunch for example) isn’t a big deal in the long run. Now, I plan healthy meals and take them with me to the office.  So I’m healthier and spending less.  Just keep working at it until you find what works best for your family.  It may be a fun challenge for your family to spend less on certain things!  Just keep in mind, budgeting is not a one-and-done event.  It is an ongoing exercise in pursuit of your family goals. Like a house, it's probably never finished! You will always need to do something to do - small tweaks like a line item adjustment or bigger tweaks like saving for a down payment.  

house building in progress
House building in progress

What can you do this week to plan your spending?