Does this look like you when you hear the B word? It used to be me also.
But then I discovered an amazing financial wizardess named Gail Vaz-Oxlade. She uses (well, used actually since I think she’s out of the budgeting game) a concept called The Life Pie – pie? Who said pie?
Ok, I’m back. In any case, the concept is that you can’t (well, shouldn’t) spend more money than you have – the money you bring home is the Whole Pie. And each area of your life is one chunk of the pie; Housing (mortgage/rent, taxes, utilities, insurance, etc), Transportation (car payment, taxes, insurance, gas, etc), Debt Repayment, Savings, and Life (what’s left over like groceries, entertainment, medical, etc). But how much should you spend on Housing? Or Transportation? Or LIFE?!?! Well I have an answer for you on that, just check out THE WHOLE PIE!
Here’s the good news – these percentages are just suggestions, with two exceptions. The first one is savings – DO NOT let this dip below 10% of your income. If you’re fortunate and have a 401(k) plan (or something similar) through your work, you can (if you choose) increase the other areas of your Life Pie or continue to put savings away – CHOICES!!!
The other place is Debt – the 15% guideline is for information. If you put your minimum debt repayments (other than home and car) into the budget tool and it totals more than 15%, YOU HAVE TOO MUCH DEBT! The 15% doesn’t mean that’s the maximum you should pay – you should pay as much as you can to pay the debt off in 3 years or less. I’ll write another blog on the Debt Snowball – this is a tool that both Gail and Dave Ramsey use and I love it!
So you’re on board, and you want to start your budget – WHAT DO I DO???? It’s ok, have a piece of pie and I’ll wait.
Ok, so the best way to start is with what you’ve currently been spending. And I know this is a drag, but bear with me. You should know historically where you’ve been spending (or overspending) so you’ll know where to cut. Take 6 months of your spending (this includes cash AND credit cards!!!) – lots of banks will allow you to do an excel export. Total them by category (they’re listed on the spreadsheet!), and divide the total by the number of months that amount represents to get an average. Use the START HERE tab on the spreadsheet for this! If you did less than 6 months, don’t forget about things that only pop up once a year – those also need to be accounted for. So things like lawn care, or car insurance and tags, Christmas, etc.
Here’s where the magic of Budgeting comes in though. As Dave Ramsey says, “a budget is just YOU telling YOUR MONEY where to go”………..and I add, “AND TRACK IT”. So once you know where you are, you’ll know where ( or if) you have to adjust, and start planning for where you want the money to go. My little spreadsheet makes that super easy, it just takes a few minutes a day or week of discipline on your part.
Click here access the spreadsheet. You’ll have to make a copy since this one is locked on Google Drive. Watch the video below for a short (well, as short as I can make it) demonstration on how to get started!
I’d love to know your progress, so comment below!
You can watch the video here. I recorded it 15 times to get it under 10 minutes!!!