Sunday, October 9, 2011

Building a Budget

Part two in our series about handling finances we will tackle the issue of budgets and how to build one that fits your family. I recently read an article in ESPN the Magazine that was all about athletes who went bankrupt and ran into money troubles. It just goes to show you that no matter how much money you have, when you just freely spend with no guidelines you can quickly get into trouble and find yourself in a heap of debt. We can't urge you more strongly: having a budget will save you so many issues!

Setting up a budget isn't rocket science either and can be done pretty easily:

Step 1: Figure out what your family income is for a month. For most people this is as easy as just adding up your regular paychecks each month. This gets more tricky though for someone who is a freelancer or whose work fluctuates. As you start to build a budget for your family, it is best to base your monthly income off of an amount that is most regularly made from month to month. In other words, if your work changes from month to month, choose the least amount made to base your budget off of each month. The months where you end up making more will be factored into step #4.

Step 2: Figure out what your non-negotiable monthly expenses are. This includes things like rent, groceries, utilities, school loan payments, gas for your car and anything else that you both decide you just can't live without. Subtract this total from your monthly total in Step 1.

If your total expenses exceed your monthly income, start cutting. The best way you can avoid money issues to not spend more than you make! (Part four and five of our money series will help with cutting your budget.)

Step 3: Once your bills are paid, there are a number of conversations to then have concerning any leftover income:
  • How much are we going to give away? This issue can be one of the biggest points of contention for so many couples. Often times in a marriage, one person is more generous than the other and it can create a lot of tension. Especially when you bring religion into the giving conversation. Our next post in this series will be completely dedicated to this issue of giving.

  • How much are we going to put in savings? Generally, experts will recommend putting about 10% of your paycheck into savings and we think this is a good place to start. However, deciding what to put in savings will be dictated by your future goals such as buying a house, starting a M.A. program or having kids.

  • How much can we spend on entertainment each month? For us, we call this budget item our "Fun Money." We use this on date nights, outings with friends, a bottle of wine after a stressful week or whatever else we deem necessary to relax and destress. These expenses are generally agreed on by both of us.

  • How much can we each spend personally? This will impact things like going out for lunch at work instead of bringing a lunch, buying the new Call of Duty game or a new pair of shoes, purchasing music (people still do that, right?) or grabbing a soda or a pack of gum when you stop for gas, etc. Generally, each person can spend this however they want.

  • What "wants" can we afford? This will include other possible expenses that were not considered non-negotiable in Step 2. 
Step 4: In a recent Yahoo article, the headline basically read something to the effect of "Teacher's Crazy Tip to Save Money." I don't know if they were being sarcastic but the tip ended up being, "Don't be afraid to be made fun of for spending less than you make." This is the final, and one of the most important parts, of making a budget work. This might seem like common sense but so many people struggle with this.

When struggles do happen, it is very important to sit down and discuss together why your budget wasn't met that month and then decide if any changes need to be made as you start a new month. It is a never a good idea to just let the issue go, assuming next month will be better. In some cases it does just go away but if it's not, climbing back out of two or three months is always more difficult than nipping an issue in the butt right away.

Sometimes a budget isn't met one month simply because of something you didn't plan for like needing to repair your car or a trip to the ER. Sometimes these are one time things and next month gets back on track automatically. Other times you need to make a decision about how to pay for the extra expense whether it means pulling from savings or working this unexpected cost into your budget for the next few months.

It's a little more difficult to deal with when your budget isn't being met because one or both of you aren't watching your spending and respecting the decisions you made together. When the issue is one person in the marriage, remember to be gentle and calm in your approach. For some people, spending is an addiction and they need grace and patience as they work through the issue. Take time to talk and understand why keeping to the budget is so difficult. Also, don't be shy about seeking out some help from a counselor to work through the issue if needed.

If the issue is both of you, we would highly recommend seeking out some help together. One option is finding a local Financial Planner in your area who will go through your finances and work with you on a budget. Another option, although we haven't experienced it ourselves, is Dave Ramsey's Financial Peace University. We have had numerous friends go through this and we have heard nothing but praise for what his classes have done for their finances. If anyone else has anything you'd recommend for working through finances together, we'd love to hear your suggestions in the comments.

Jake and Melissa

The Money Series:
Part 1: Starting the Money Conversation
Part 2: Building a Budget (you're reading it)
Part 3: Deciding What to Give
Part 4: Do We Really Need That: Understanding Needs vs. Wants
Part 5: Cutting Corners: Tips for Tight Budgets

3 comments:

  1. Well said. I will add that in my experience one of the most difficult things is when one of you classifies something as a "want" and the other classifies it as a "need." I know that as a guy, it took me a couple years of marriage to really understand that my bride "NEEDS" to have some money to spend on decorating the house to nest. So I think that is another thing you need to include in this conversation of a budget because even if you agree on the categories, each of you may assign certain purchases to different categories. Just like everything else with money, working through these issues requires a lot of grace and patience.

    ReplyDelete
  2. Great stuff guys, but just remember that, for Christian couples, the amount we give back to God has to come BEFORE we pay ANY other bills. It comes from our "first fruits" and not what is left over after the bills are paid or even after taxes. We need to give God the FIRST 10% (at minimum)of our gross income. Some would argue for 10% after taxes, and for many couples this would be a HUGE improvement on what they give, but maturity in giving will come when we tithe from our First Fruits and not the left overs. The tithe needs to be included in Step 2,your non-negotiable monthly expenses. Thanks for all your great articles!

    ReplyDelete
  3. Love the blog and posts. Can't wait to share this with my wife. I agree with Mark and DJ, as a pastor myself, God deserves our best and first fruits. The first thing my wife and I do is write out that check every week. It's a no brainer.

    Thank you guys!

    ReplyDelete

Our goal of this blog is to share stories (both good and bad), thoughts and insights about our marriage and we would love for you to jump into the conversation.

The goal is to provide three things:
1) HOPE for struggling couples that they are not alone.
2) GROWTH in our marriages and our understanding of marriage.
3) ENCOURAGEMENT to keep loving your spouse unconditionally.