With the economy recovering at a snail’s pace, there is reason for families to have a budget in place. There are so many tools available to help people come up with a budget that works for the family. I have never purchased any of these tools, so I cannot say what I like or dislike about them. However, I can share with you a tool that I have been using for years. It’s called Microsoft Excel and basic first grade math. It’s simple. It allows me to see what I spend my money on. It also allows me to split payments in half so that I have the same amount of “extra” cash available after both paychecks. I know a lot of people who pay their mortgage with one paycheck and then everything else with the other. In most cases, this means they have to wait for that one time per month to do most of their spending. The way I budget allows me to have the same amount of spending allowance regardless of what time of the month it is. I never have those “this is the bad paycheck” worries. This works well for me, so I thought I’d share it.
Before I get to the spreadsheet, the first step is figuring out your costs. Write them down old school with a pencil and a plain piece of paper. Be honest with yourself! Anything not on the below list will most likely fall into what I like to call the “extras” category. “Extras” is anything that you don’t need but spend money on anyway, such as eating out, clothing or gifts. In other words, any spending money leftover at the end of each pay period can be used for anything else you need. Here are some example costs (you may need to adjust these for your family and your particular needs):
Phone (landline) =$100/month
Phone (cell) =$100/month
Pest control services=$33/month
529 savings for children=$100/month
Once I have the costs, I split them up as evenly as possible and add them to the spreadsheet. Note that everything that I split in half (mortgage, grocery bill) is highlighted in red on my sample sheet below. The sample sheet I’ve come up with is based on a salary of $3000/month net (no, this is not my income; I am just using this figure to make things easier).
When I say “split”, I mean that I take the cost of the monthly mortgage and divide it in half. When I get my bi-weekly paycheck, I automatically mentally subtract half of my mortgage from each paycheck. It’s sort of like writing a check to yourself and cashing it when your mortgage is due.
Some bills come quarterly (like waste management and pest control). For these, I divide the total cost into thirds and deduct the cost monthly. This just ensures that I have the money when the bill is due. And it also stops me from getting “surprised” by a hundred dollar pest control bill every quarter.
Just to note: I used a very simple formula in Excel to subtract the cost from the available cash. You can do it this way or use a calculator to do the subtraction. It’s up to you.
As you can see, I also have a “predicted” column and an “actual” column. The “actual” column isn’t necessary, but I like to see where my money goes. For instance, if I decide to buy something for myself or go out to eat, I note it as an extra in the “actual” column. This way, every month, I know exactly where every penny went. It’s also interesting to see monthly spending trends.
Here’s a little anecdote about this. When I first started this budget sheet, I had a Starbucks obsession and didn’t realize it. Every time I went to Starbucks, I put the amount of my latte in the “actual” column and kept adding the receipts up throughout the month. At that time, I was spending $120/month on Starbucks. After my shock wore off, that was the first behavior that I changed. Now, I save my Starbucks visits for the fall when the Pumpkin Spice Latte is available. J
In closing, I’ve found that deducting money from each paycheck every month in smaller amounts doesn’t hit the pocket as hard when it’s time to pay the bills. Is this the very definition of paycheck to paycheck living? Possibly, but it doesn’t ever stress me out in the way that “paycheck to paycheck living” is normally described. When it comes down to it, you should have the same amount of money to play with regardless of how you decide to budget. I just prefer doing it this way.
As always, your questions and comments are welcome! Happy budgeting!