Tuesday, March 1, 2011

You need a budget! ...and so do I

I look at my life and bills and wonder what the crap HAPPEN!! Unfortunately I'm sure most of you can relate. After trying to use programs like MS Money, Quicken, MINT, and a tone of others I found out that those programs are for people of actually have there financial life under control. But we are different! We live on the edge! Which while being exciting at times... I'm sure it's not to best way to live. So I made a plan and using this plan I hope to pay off all my credit cards, build OSM (oh shoot money), retirement plan, and truly becoming financially independent. What better time to do that then on my birthday! :)

Heres the plan!

I get paid every two weeks, and I have found it easier to budget by breaking it down by pay period.
For the purpose of this example, let's say I make net $1500 every two weeks, and I'll use the first pay period as an example.

1. Always pay yourself (savings account) first.
I try to save $100 every two weeks. So $1500-$100= $1400

2. Divide mortgage/rent by 2.
If $1355/2=$677.50, then $1400-$677.50 = $722.50

3. Divide your recurring bills for the month into similar amounts.
If $723.79/2 = $361.89, then $722.50-$361.89 = 360.61

So now, we're at 360.61

4. Now, I get paid on the 1st and the 16th. So my $360.61 needs to cover me from the 1st until the 15th.
So, $360.61/15=$24, so I have $24 allowed to spend for every single day until the next pay period (this is for groceries, gas, etc…).

5. If I go “over” on any given day, then I just re-compute based on the balance I have left. For example, if I spend $100 on Groceries and gas on the 1st, then I just re-calculate for the other 14 days ($360.61-$100=$260.61/14= $18.61 a day).

Screwing up at the beginning (going over), isn't that painful, since the overage is spread out over a (relatively) long period of time. (I very rarely get an “overage”, it's hard to spend $24 a day on just daily expenses) Towards the end, you'll notice that the times you could only really spend maybe $10 or less, will boost your daily “allowance” significantly.

Usually, by the end of the pay period (on Day 15), I'll have like a $100 “allowance” for the day. On the 15th, I transfer over (to savings) whatever I had left from the beginning-of-the-month paycheck.

To make things even simpler I have put together a spreadsheet.

NOTE: "Totals; Mortgage/Rent"  must be changed manually. Daily Allowance takes the "After Bills" and divides that by the "Allowance Days" number. Everything else is auto pilot for your enjoyment. I will be doing this method and I will report at then end of the month how it has changed my financial life. Care to join me?

If you don't have Microsoft Excel... do as I do and use LibreOffice. It's awesome and free!


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