Fall Budget Challenge Step 2: Create Your Budget

Posted on Flickr by  Tax Credits

Posted on Flickr by Tax Credits

One month ago we started the fall budget challenge! If you missed the first budgeting post, check it out! Hopefully, you have tried tracking your spending for the past month. If not, it is never too late to start! This week, I will show you how to create your budget for the next school year.

Before we begin with the budgeting, let’s spend some time learning from your hard work of tracking your spending. If you were able to track your spending for the last month, great job! If not, you can certainly use your bank and/or credit card statement as a start. Take a look, where does most of your spending go? Housing? Car? Groceries? Entertainment? Dining out? Are there any surprises in your spending? Is your spending going to the places that you want it to go to? Are you spending in accordance with your values? What spending habits do you have, both bad and good? One of my biggest surprises when I first started tracking my spending is how much of my money goes towards groceries and eating out. Check out this article “Confessions of a Foodie” from last summer for more information. Keep these discoveries in mind as you create your budget.

Now, how to create a budget:

1. Choose your system: You can choose to create and track your budget using a variety of different tools. You might want to use the same one that you used to track your spending, or switch to another one.

  • Worksheet: Some people still enjoy putting pen to paper, if that is you check out this worksheet.
  • Spreadsheet: Excel offers a variety of different worksheets. This site features a few good templates that you can use with Excel or Google Docs.
  • Envelope System: Create your budget then take out cash for all of your expenses and put cash in specific envelopes. You can only spend what is in the envelope. For more information check out this link.
  • Budgeting Software: There are a variety of different programs out there; one of the most popular is Quicken.
  • Online Site: Again, there are a variety of sites. I use Mint.com because it syncs with my bank account, categorizes my transactions and tracks my budgets all in one place. You might also check out these personal finance apps.

2. Create your budget: The goal of the budget is to make sure that you are both living within your means and spending in accordance with your values. Over the past few weeks you have tracked your spending. You will want to use this information to help you create your budget categories as well as decide on how much money to allot to each category. Begin by calculating your different streams of income such as student loans, scholarships, job income, gifts, etc and how much you have in each category for each month. Then, calculate your different expenses making sure to include both needs (bills, rent, tuition, groceries, gas, etc.) and wants (dining out, coffee shops, shopping, entertainment, etc.). You can create as many or as few categories as you like, it is just important that every specific spending item fits into a category.

Here are some questions to ask yourself as you begin outlining your budget:

  • Prepare for the Unexpected: Do you have an emergency fund to draw on if you lose your job or incur unexpected expenses (car repairs, medical bills, etc.)?
  • Plan for the Future: Do you have a savings account that you regularly contribute to? Even a small amount (such as $25) every month can add up. Are you investing in your retirement? Are you saving up for a large purchase (computer, car, house, etc.)? If you have student loans, could you pay off the interest now?
  • Save for Occasional Expenses: Do you have a way to pay for occasional expenses? Make sure that you take into account how you will pay for Christmas and birthday gifts, travel for the holidays and other occasional expenses so that they don’t end up breaking your budget.
  • Problem Areas: As you tracked your spending did you find any problem areas? If so, gently challenge yourself to be more frugal in those areas. Remember to start out slow, it takes a long time to change a bad habit.
  • Have Fun: Where is your discretionary spending? Many people when they are first budgeting forget to give themselves some room to have fun. While it is important to be frugal and align your spending with your values, it is important to have some space in your budget for the fun stuff such as dining out and entertainment.
  • Be Flexible: It can be difficult to precisely predict your spending, especially if this is your first budget, so be flexible. If you have to switch some things around to better fit you, that’s fine!

Happy Budgeting!

Join the Conversation: What are your budgeting tips?

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Give First

625456_742535680785_121657861_nIn late January, the car that I had been driving for the past ten years, my Volkswagen Bug, decided to call it quits. I soon found out that getting a new vehicle brought with it a whole new set of expenses, namely car payments and higher insurance rates. I spent many nights staring at my budget wondering how on earth I was ever going to make these payments happen. I cut down much of my discretionary spending, like entertainment and dining out, but the hardest expense for me to cut was my giving. For the first time in my life I had to cut the percentage of my income that I give to the church and other non-profits that I really care about. The decision grieved me, and quite honestly still does. One of my greatest joys in life is giving money away to causes that I care about. But, I knew that this is what I had to do for the time being.

As I have talked to other young adults, I’ve realized that I am not alone. Those who come to graduate school after being in the work force often face decisions like this as they learn how to live on a considerably smaller income. Young adults coming out of college or graduate school with debt feel this tension as they realize what portion of their income will be going towards their student loans. Similarly, young couples who are buying their first home also have to make these sorts of tough decisions as they realize that their mortgage payments will consume a large portion of their budget. In the face of such financial pressures, giving often ends up on the bottom of our budget or as a piece of what is left over (if there is any).

But, what would it look like to give first?

In The Soul of Money, Lynne Twist writes, “You feel vibrant and alive when you use your money in a way that represents you, not just a response to the market economy, but also an expression of who you are. When you let your money move to things you care about, your life lights up. That’s really what money is for.” (119) When I think about the things that I really value in life the first things to come to mind are not usually my apartment, groceries, or student loans, while I know that I need all of those things. Rather the first things to come to mind are sustaining my relationships, fostering my faith community, ending world hunger, and providing scholarships to make sure that everyone has an opportunity to get a good education. What comes to mind for you?

Giving first, as a part of my normal budgeted expenses, no matter how small the amount, makes me feel alive! It reminds me that no matter how little I have to give I can still make a difference in the world through the causes that I believe in. This is not to say that there aren’t other ways to give outside of money. There are many great ways to give of our time and talents that make a huge difference for the causes we love. But, when we only give of our time and neglect our money we forget the great power that money has. Twist writes, “One of the greatest dynamics of money is that it grounds us, and when we put money behind our commitments it grounds them, too, making them real in the world . . . Money is a great translator of intention to reality.” (194) When we give money to places that we value, it reminds us that we are not only consumers but also givers and that economic pressures do not need to have the last word.

So, I challenge you to join me in giving first; to let your giving be intentional, rather than an after thought. In the worlds of Lynne Twist, I invite you “to imbue your money with soul—your soul—and let it stand for who you are, your love, your heart, your word, and your humanity.” (257)

Join the Conversation: What do you think about giving first? Is this something that would work for you?

Summer Budget Challenge: Create Your Budget

Throughout this summer we have been working together to track our spending, align our spending with our values and now create a budget. If you missed the first segment or the second segment of the Summer Budget Challenge definitely check those out. This week, I will show you how to create your budget for the next year.

1. Choose your system: You can choose to create and track your budget using a variety of different tools. You might want to use the one that you used to track your spending, or switch to another one.

  • Worksheet: Some people still enjoy putting pen to paper, if that is you check out this worksheet.
  • Spreadsheet: Excel offers a variety of different worksheets. This site features a few good templates that you can use with Excel or Google Docs.
  • Envelope System: Create your budget then take out cash for all of your expenses and put cash in specific envelopes. You can only spend what is in the envelope. For more information check out this link.
  • Budgeting Software: There are a variety of different programs out there; one of the most popular is Quicken.
  • Online Site: Again, there are a variety of sites. I use Mint.com because it syncs with my bank account, categorizes my transactions and tracks my budgets all in one place.

2. Create your budget: Over the past few weeks you have tracked your spending and aligned your spending with your values. You will want to use this information to help you create your budget categories as well as decide on how much money to allot to each category. Here are some questions to ask yourself as you begin outlining your budget:

  • Prepare for the Unexpected: Do you have an emergency fund to draw on if you lose your job or incur unexpected expenses (car repairs, medical bills, etc.)?
  • Plan for the Future: Do you have a savings account that you regularly contribute to? Even a small amount (such as $25) every month can add up. Are you investing in your retirement? Are you saving up for a large purchase (computer, car, house, etc.)? If you have student loans, could you pay off the interest now?
  • Save for Occasional Expenses: Do you have a way to pay for occasional expenses? Make sure that you take into account how you will pay for Christmas and Birthday gifts, travel for the holidays and other occasional expenses so that these expenses don’t break the bank.
  • Problem Areas: As you tracked your spending did you find any problem areas? If so, gently challenge yourself to be more frugal in those areas. Remember to start out slow, it takes a long time to change a bad habit.
  • Have Fun: Where is your discretionary spending? Many people when they are first budgeting forget to give themselves some room to have fun. While it is important to be frugal and align your spending with your values, it is important to have some space in your budget for the fun stuff.
  • Be Flexible: It can be difficult to precisely predict your spending, especially if this is your first budget, so be flexible. If you have to switch some things around to better fit you, that’s fine!

Happy Budgeting!

Join the Conversation: What are your budgeting tips?

Minimizing Your Student Debt While In School

While it may be impossible for you to stay out of debt completely while you are in school, they are definitely ways to borrow less. Here are some tips for how you can minimize your debt while in graduate school. A special thanks to Darryl Dahlheimer Program Director of Lutheran Social Service Financial Counseling Service for helping me create this list!

  • Live Like A Student: While you may be a graduate student, you are still a student so you should adjust your expectations accordingly. Think about how you can “live like a student” in every aspect of your life. This might mean living with roommates rather than getting your own place, forgoing a car and taking the bus or biking, cutting your food expenses by making rice and beans a staple of your diet, reducing your phone plan to include only the things that you need, and opting for a stay-cation in lieu of a more expensive, exotic vacation.
  • Track Your Spending: Did you know that a $3 coffee drink five times a week can cost you $60/month or $720/year? Small purchases can really add up! Often times, we don’t even know where our money is going. Take up the discipline of tracking your spending. Write down each expense/purchase rounding to the nearest dollar. After a few weeks you will begin to see some patterns of where your money is going, knowing these patterns can help you cut excess spending.
  • Discretionary Cash: One way I have found to cut my discretionary spending is to use cash. I budget a certain amount for discretionary spending each month (eating out, recreation, concerts, snacks, etc.) and take out the money in cash. I can spend the money on whatever I like but I only have a certain amount and when it is gone, it is gone. Using cash helps you to physically see where your money is going and how much you have left.
  • Return the Money that You Don’t Need: Loan money is NOT FREE MONEY! It might be enticing to just take all of the money offered to you so that you can buy something new, but this will definitely hurt you in the long run. Make a budget of what you need for school and what you need to live on and don’t take out any more than you need. That being said, don’t forget to account for unexpected expenses so you are not stuck if something comes up like car maintenance or an unexpected trip.
  • Adjust Your Schooling to Borrow Less: This may not be an option for everyone, but if you can you might adjust your schooling so that you don’t need to borrow as much. You might begin your education online, spread out your classes over time or find a way to condense your education to three years instead of four by taking advantage of summer classes.
  • Hunt for Free Money: There is a lot of grant and scholarship money available from a variety of organizations and corporations. It is worth your while to spend some time searching for some of these hidden treasures. Even $500 or $1000 can make a big difference. Be creative by searching not only by your education area but also by your interests. You could be the next recipient of a canoeing scholarship! Check out fastweb.com to search for scholarships and grants.
  • Get a Job: A job can help you take out less loans or even start paying off your loans. However, a job can also be dangerous if it overwhelms your schooling. Make sure you find a job that you can balance with your school work, there is no sense in accruing loans for something that you don’t have the time to invest in!
  • Pay Attention to Your Loans: Keep track of how much you owe in both interest and principal. Some schools allow you to take out subsidized loans, if you have the option to shift some of your unsubsidized loans to subsidized loans you will save a lot of money in interest. Also, if you can pay your interest while you are in school that will also save you quite a bit of money in the long run.
  • LSS Financial Counseling Service:Lutheran Social Service (LSS) of Minnesota offers free budget and debt counseling. They have expert coaching for student loans. They also have debt management plans to help people paying off Credit Card debt and avoid scams for a nominal monthly fee. Call their toll-free number 1-888-577-2227 to set up a phone appointment or an in person appointment at one of their three area offices. You don’t need to be Lutheran or a student to benefit from their services!

Join the Conversation: What strategies have you tried for minimizing your student loan debt while you are in school?

Frugal New Year’s Resolutions: Will 2012 Be Your Year?

Will 2012 be your year to become more frugal? Most people who make a list of New Year’s Resolutions will include at least one item related to spending, saving or sharing their money. Whether you are preparing to take on a daunting list or you haven’t even given a thought to New Year’s Resolutions, why not make a frugal goal for the coming year. Here are a few ideas:

  • Managing Your Credit Card Debt: Do you struggle with credit card debt? This year you could create a plan to eliminate your credit card debt and begin paying your credit card bills on time.
  • Increasing Your Charitable Giving: Often times charitable giving ends up being the last thing on the list when money comes in. Why not begin making it a priority? If you are more of a spontaneous giver, why not begin making your giving more consistent?
  • Paying Off The Interest On Your Student Loans: This is immensely important because it can save you a lot of money in the long run, but many students don’t take advantage of it.
  • Cutting A Bad Spending Habit: We all have bad spending habits, those little (or not so little) impulse buys that really add up. Whether you buy clearance clothes because they are a bargain but you never actually wear them or you over-indulge in pre-packaged foods, this is a good time to identify and begin cutting your bad habit.
  • Creating and Maintaining a Budget: If you haven’t done this already, this is a great habit to form. For more information check out these blog posts on creating and maintaining a budget.
  • Begin Saving Money: Savings really do add up even if it is just $20 per month. If you can take it out of your checking account by automatic withdrawal that’s even better, you won’t even miss it.
  • Living Within Your Means: Challenge yourself to actually live within your means this year by being intentional about only spending what you are earning.
  • Form Your Own Frugal Community: Get a group of friends together for a frugal party every month. Start a group that tries to find the best happy hour deals. Gather some people together to make homemade frugal gifts that you can use for any occasion.

I’m still trying to decide on my frugal New Year’s Resolution. What is your New Year’s Resolution for 2012?

BUDGETING 101: ABCs of Maintaining a Budget

This is the second post in a two-part series on creating and maintaining a budget. If you missed the first part, check it out.

Automate as Many Things as Possible: Automating your bills and savings can help you control your spending. You don’t have to worry about paying bills late, just don’t overdraw!

Buy Only What You Need: It is easy to get suckered in by a good deal and buy something that you don’t need. Don’t let anything sit on the shelf!

Community: Buddy up with a friend who is also on a tight budget. Be intentional about encouraging and challenging one another. Think of fun and frugal things to do together!

Ditch the Cards and Use Cash: It is a lot easier to visualize how much you are spending if you are using cash rather than just swiping a card.

Envelope System: Take out cash for all of your expenses and put cash in specific envelopes. You can only spend what is in the envelope. For more information check out this link.

Flexibility: It’s important to be flexible since unexpected expenditures do come up.

Grow your Emergency Fund: When you are on a tight budget it can be difficult to set aside a large amount of money right away so continue growing your fund every month.

Habits: Look long and hard at your spending habits. Do you have any that are really wasting your money?

Interest on Loans: If you can begin paying the interest on your debt while you are still in school this will help you a lot in the long run.

Job: Do you have a hobby that could make you some money? Do you bake desserts or knit sweaters? Could you tutor someone?

Keep A Close Eye on Your Cash Flow: Just because you have a budget doesn’t mean that you shouldn’t look over all your transactions on a frequent basis.

Look on the Bright Side: It is really important to keep a positive attitude about budgeting. Budgeting should help you to focus on what you CAN afford rather than what you can’t.

Make Space for the Fun Stuff: Although your budget might require you to take some of your fun stuff down a notch, these activities should never be eliminated completely.

Never Borrow More than You Need: Only borrow what you need. Remember this is not “free money” you will have to pay it back some day.

Occasional Expenses: Don’t forget about Christmas, birthdays or taxes, make sure that you set money aside for these throughout the year so that they don’t break the bank.

Patience: Whether it’s your first time or your fiftieth time creating a budget, it takes time to adapt to a new system and control bad spending habits.

Quiz: Wonder how well your budget is working? Take this quick budget assessment quiz.

Reward Yourself: Rewards can help you to stay motivated even when you are feeling constrained. Some rewards might be a nice dinner out, concert tickets, vacation or dessert.

Shop Around: Be a conscious shopper. Consider buying used items instead of new.

Thirty Day List: This is a great way to determine if you really think it is worth it to buy a new computer, car, technological gadget, vacation, etc. Write down the item that you want and the date, if you still want it after 30 days then see how it fits into your budget.

Use Prepaid Cards: A modern update of the envelope system, get prepaid cards from the bank and use them for specific expenses. For more information check out this link.

Vision: It’s important to have a positive vision in mind (like being debt-free, giving more of your money away, or saving up for a large expense) that you can remember when your budget gets tight or you start feeling deprived.

Watch Your Household Costs: If you pay for your heat, consider turning the dial down a few degrees and putting on a sweater. If you pay for your electricity, make sure that you are turning off the lights before you leave the room.

X-amine Your Budget Regularly: Do you think that this budget still reflects your priorities? Did you over or under-estimate your budget in any categories? Is your budget realistic?

Your Savings Account: Treat your savings as a bill that has to be paid every month. Put it at the top of the list.

Zillions of Credit Cards: Cut down on the number of credit cards in your wallet so that you are not tempted to use them for extra expenses.

Join the Conversation. How do you maintain your budget?

BUDGETING 101: Creating A Budget

This is the first in a two part series on creating and maintaining a budget.

1. Evaluate Your Cash Flow:

  • Track Your Income: The first step in creating a budget is tracking all of your different forms of income including: scholarships/fellowships, loans and work payment.
  • Track Your Expenses/Spending: The second step is tracking your expenses, make sure to include your priority expenses (housing payments, bills, groceries, etc.) as well as your discretionary spending. You can do this in a variety of ways:
    • Worksheet Method: Some people still enjoy putting pen to paper, if that is you check out this worksheet.
    • Excel Spreadsheet: Microsoft provides a variety of personal budgeting templates.
    • Budgeting Software: There are a variety of different programs out there, one of the most popular is Quicken.
    • Online Site: Again, there are a variety of sites. I use Mint.com because it syncs with my bank account, categorizes my transactions and tracks my budgets all in one place.
  • The Bottom Line: Subtract your expenses from your income to see how you are doing. Is the number positive or negative? If your number is negative, you are spending more than you are earning. The goal of budgeting is to create a plan to spend less than you earn. If your number is positive that’s good but it’s not the end of the conversation. It’s important to make sure that you are maximizing your assets and planning for the future.
  • Aligning Your Spending with Your Priorities: Evaluate your spending and make sure that your spending reflects your personal values and priorities. Is your money going to the places and people that matter most to you? Are you taking care of your needs before you are taking care of your wants? What are some doable trade-offs that you can make?

2. Create Your Budget: Use your tracked expenses to create your budget categories, be as specific as you like. Make sure that you account for both your priority expenses and your discretionary spending. Be realistic with your expectations and make sure that you don’t forget to:

  • Prepare for the Unexpected: Do you have an emergency fund to draw on if you lose your job or incur unexpected expenses (car repairs, medical bills, etc.)?
  • Plan for the Future: Do you have a savings account that you regularly contribute to? Even a small amount (such as $25) every month can add up. Are you investing in your retirement? Are you saving up for a large purchase (computer, car, house, etc.)? If you have student loans, could you pay off the interest now?
  • Save for Occasional Expenses: Do you have a way to pay for occasional expenses? Make sure that you take into account how you will pay for Christmas and Birthday gifts, travel for the holidays and other occasional expenses so that these expenses don’t break the bank.
  • Problem Areas: As you tracked your spending did you find any problem areas? If so, gently challenge yourself to be more frugal in those areas. Remember to start out slow, it takes a long time to change a bad habit.
  • Have Fun: Where is your discretionary spending? Many people when they are first budgeting forget to give themselves some room to have fun. While it is important to be frugal and align your spending with your values, it is important to have some space in your budget for the fun stuff.
  • Be Flexible: It can be difficult to precisely predict your spending, especially if this is your first budget, so be flexible. If you have to switch some things around to better fit you, that’s fine!

Join the conversation. If you appreciated this post, consider “liking” this post in the “leave a comment” section. Or, join the conversation by leaving a comment: How do you budget? What are some strategies that you use?