Saving Up for Disney

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Budgeting Steps to Savings – Coming up with your “True” Budget

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Are you saving up for Disney? Find your true budget. www.savingupfordisney.com

We all have those numbers in our head. They aren’t exact because, well things fluctuate month to month. You know approximately what you earn each month. An idea of what you spend each month. A soft number of whatever is left over after everything’s been paid. Or maybe there isn’t anything left at the end of the month…how did THAT happen?!

It’s time to figure out your “true budget”. You can’t track in your head if you want an accurate budget, you’ll need to write it all out. Being able to save money each month means you have a much firmer grip on your actual numbers.

  • You’ll know what your monthly income will be.
  • You’ll know how much money you are going to spend that month.
  • You’ll know exactly what you will be putting into savings.
  • And only then will you have an idea how much you can sock away into your Vacation Bank!

There are hundreds of free online budget templates you could use to plug in numbers and the software would automatically compute everything for you. It may even give you a fancy-looking graph or a pie chart. However I think computing your own numbers and physically doing this “hands on” with a pencil and paper simplifies things and makes your money real. These aren’t just numbers; these are your hard-earned dollars and only you are responsible for the spending of each one of those dollars. They don’t fly out of your bank account on their own, you know (though it does feel like that sometimes!).

Sit down with a pad of paper (or the handy worksheet I’ve created for finding your true budget), a calculator, all of your monthly bills, a few colored highlighters (or crayons), bank and credit cards statements and a pencil. If you have your bank and credit card statements online, print them out a few months back.

1. EXPENSES:

Pull out your monthly bank and credit card statements. If you tend to pay cash for expenses, keep your receipts to tally.

  • Highlight everything that is a rotating monthly bill. These are almost always going to be the exact same amount month to month. The payment is due the same time each month. {ie: Rent/mortgage. Auto loan. Car insurance. Trash bill. Cable. Phones.}
  • In a second color, highlight your fluctuating monthly expenses. The amounts may not always be the same month to month. {Water. Electricity. Gas for your cars or transportation costs. Groceries. Household stuff, like toilet paper or soap. Medical Bills. Outstanding credit card balances}
  • In a third color, highlight your automatic withdrawls. These are monthly expenses you’ve already set up where you never see the money leave your account. Perhaps they are the same amount every month, perhaps they vary. {Gym membership. Tuitions.  Netflix. Donations. Medical/Dental/Life Insurance. Student or Bank loans etc.}
  • Underline expenses that were out of the norm, like maybe you had to get new tires or had a plumbing leak that required repair. These expenses come up occasionally, just hopefully not every month!
  • Finally you are going to circle the last group, the “extra” stuff. We’re talking toiletries (like a new tube of lipstick). Back to school clothes. Things you grabbed in the Target Dollar Bin because, well “they were a dollar!”. The birthday gifts you bought for the three parties your kid was invited to this weekend. The beautiful new blouse that was on sale and you really don’t know where you’re going to wear it but it was on sale and you had to have it. Some of these extras might be necessary (like the back to school clothes for the kids). And there might be other “extras” that you could have lived without (like eating out or buying non-necessities). Circle all of these extra expenses.

For the purposes of getting really hands-on, simply writing down your expenses every day can be a real eye-opener. Just like those who are trying to lose weight will write down every bite or nibble, so should you log your every penny to get a good look at your daily expenses. It’s easy to forget the little things, like money handed over for a school field trip, lunch out with friends or money for the collection basket at church. Keep track of all of it in a small notebook.

2. INCOME:

  • Pull out your monthly bank statement. Highlight everything on your account that is a deposit. Note on your budget where the money came from. If you have a job where the monthly paycheck fluctuates because of tips or overtime it will be more challenging for you to figure out a true budget. More challenging, but not impossible. I work one day a week at a recreation center teaching children gymnastics and my paycheck varies depending upon how many students I have registered. I also sell boutique items in my Etsy shop. Some months I have 10 orders, other months, none! If this is the case for you too, give yourself a range between your lowest and highest paycheck so you have a best/worst case scenario of what you are working with.

3. CHART IT OUT:

  • Fill in the worksheet with your expenses and incomes.
  • Total the columns and simply subtract your expenses from your income. What do you have left? That’s your month end difference.

4. DIVIDING UP THE MONTH END DIFFERENCE:

You’ve heard it before, “Pay Yourself First”

  • Yes, even when you are trying to pay off credit cards or putting money into a Vacation Bank, you should still always be “paying yourself first” by putting money into a savings or retirement account. Things happen and everyone should have a cushion to fall back on. Consider setting it up with the bank to have a set amount diverted immediately into a saving account when your paycheck is deposited. I highly recommend plugging 50% of your month end difference into your savings account.

What if you have outstanding credit card balances that are currently incurring interest?

  • Start by calling your credit card companies to find out if they will lower the interest rate in any way while you work on paying off the balance. You never know unless you ask. Some credit card companies will offer you a deal (ie: lessen the amount owed) if you pay the entire balance off at once. If you have the extra money to do that, by all means you should. Just don’t clean out your savings account to do so.
  • Divide your difference in half. Put half into savings and the other half towards the credit card with the lowest amount owed. So if you have three charge cards, one for $125, one at $375 and one at $1650, you should be paying the minimum balance on the second two cards and half of your difference on the card for $125 until it’s paid off.
  • Once that card is paid off, keep it open (closing it can negatively affect your credit score). However you should only use it sparingly and always pay it off in full each month to avoid interest charges. When that card is paid off, the money you were using for that card should be added to the next lowest balance card. Continue in this way until all charge cards are paid off in full. I speak of past experience, this method does work and can truly get you out of debt.

Finally…Vacation Bank $$

  • Now it’s time to see how much you have left to set aside each month to add to your Vacation Bank! I suggest getting an actual account at the bank to put your money in that you will transfer to after all other expenses have been taken care of.

Now, pull out the budget estimate you created in Step 1 and compare it to your true budget. Are there some major discrepancies between the two? Where did the majority of your expenses occur? Did you spend more on “extras” than you thought? I know when we first did our budget, we were shocked to see how much we were spending on groceries. However when we really figured things out, we realized that we were not overspending so much as under-estimating the costs. Since we eat at home or pack lunches 95% of the time, we just hadn’t estimated enough in our grocery column.

I suggest doing your true budget in this way for at least three consecutive months to get a feel of your spending patterns. Once you can see your patterns, you will start to see ways to shave off little bits of spending here and there. We’ll work together on that in Budgeting Step 3.

Handy Budgeting Links: 

US News 7 Simple Ways to Stay on Budget

The Simple Dollar Ten Tips for Making your Budget Successful

Budgeting Step 1 – How Much is this Going to Cost? – Planning a vacation

Budgeting Worksheets

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2 thoughts on “Budgeting Steps to Savings – Coming up with your “True” Budget

  1. Pingback: Budgeting Steps to Savings – Why Do We Pay Everything With Credit Cards? | Saving Up For Disney

  2. Pingback: Resolution Series – “I Want to Save More Money” – 5 Basic Questions to Ask Yourself | Saving Up for Disney

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