Ask:
I feel like I have a budget in my mind and I know what not to go over, but to actually write it down to the penny, I do not understand how to do. When I figure our bills/extras versus take home pay, we have enough to pay everything with some left over. What I don't get is that I bought one of Dave Ramseys books called the Financial Peace Planner. It has a sample budget. He wants every single penny budgeted, even whats left over so that at the end of the month you come out exactly even to zero. I can do this on paper, but I can't figure out how to really make it work. There's always things that pop up that aren't going to be on the budget, what do you do then? It just baffles me. I feel I am pretty good with money, I always check prices to get the best deal, I don't buy on impulse, I don't buy designer clothes, and I really try to watch what I spend on anything. I try to be as frugal as possible, but I just don't fully get the method of budgeting to the penny. How do you make your budget work?
Answer:
That 'to the penny' income and expense statement is simply an accounting technique. AND those numbers are reported in hindsight. A budget is a plan for the future. In other words, a budget is a spending plan.
Which is how I look at it - a spending plan. When the month (week, day, year) is over I then look to see my actual spending compared to the plan. I then decide how I want to make changes going forward.
For instance, if I budget $10 a month to casual dining out (a cup of coffee on the go, etc) and find out I'm really spending $25, I can then decide to up my budget in that category to match my actual spending - and adjust another category downward, or I can decide to curb my spending in that category and stay on budget.
Answer:
Simplemom - You are right Dave does recommend at the beginning of the month to know where every penny is going! It is better to know ahead than after the fact because once it is over there are no "redo"s.
When you have things pop up (like brakes on the car etc) that is when you use your emergency fund. When you are just starting out, your emergency fund needs to be about $1000. After you use it, tho, make sure you refund your emergency fund. Make sense.
Right now, we have cash envelopes for Groceries, Diapers, Eating out, Entertainment, Clothing, Gifts, Miscellaneous there is another and right now my mind is blank.
Dave also says to budget "Blow Money". There will be times that you will blow it so budget for it. THat is our Miscellaneous.
Hope that helps...if you have any questions please feel free to PM me.
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I think I need this book.
Answer:
I think I need it too!
If I could manage to budget at all I would be a lot better off!