Notes on Parenting

Insights for parenting babies, toddlers, teens, and young adults.

Monday, October 4, 2010

How To Write Your Budget

Now that you’ve tracked your spending, it’s time to write your budget.

Remember, if you can follow a budget, you are much more likely to get what you REALLY want most.

When you receive income (after taxes), take these steps:

  1. Pay to charity or church. 10%
  2. Pay yourself (personal goals). 15-20% is recommended.
  3. Pay others (expenses).
  4. Apply any leftovers to your personal goals.
If you can learn to use this budgeting structure, you are twice as likely to be able to accomplish your goals because you get two chances to put your money towards those goals. Many people set up a budget like this:

Income – Pay charity – Pay others – Pay yourself if there’s anything left over.

Can you see what’s wrong with this method? If you ALWAYS pay yourself before you pay others, you are guaranteed to meet your personal goals eventually. If you pay others first, you likely won’t have anything left for yourself. If you’re still skeptical, here’s what L. Tom Perry had to say about this:
“After paying your…10 percent to [church or charity], you pay yourself a predetermined amount directly into savings. That leaves you with a balance of your income to budget for taxes, food, clothing, shelter, transportation, etc. It is amazing to me that so many people work all of their lives for the grocer, the landlord, the power company, the automobile salesman, and the bank, and yet think so little of their own efforts that they pay themselves nothing.”
Following a budget can be a life-improving habit for anyone! But like any habit, budgeting takes time to be habit-forming. Don’t be hard on yourself if you find that you grossly underestimated expenses in a few categories.You’ll find yourself improving each month.

Keep these guidelines in mind:
  • Look at what you spent last month as a guide for this month’s planning.
  • Distinguish between needs and wants (discretionary spending).
  • For the first month, it might be easier not to alter your spending too much from last month — this could frustrate you into completely abandoning your budget if you fail to meet your new spending limits.
  • As you meet with your spouse each week to review your finances, make sure that your spending for the week has been consistent with your budget.
Your challenge this month is to write your budget according to the structure described and stick to it!

I'm Jenny Willardson from A Young Mom's Guide to Motherhood, Money, & Marriage, and I'm excited to be a new guest author on Notes on Parenting! Look for me every 1st and 3rd Mondays of each month for more advice on family finances.



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