Before you can ever begin living under your monthly income, you need to be able to live within your income for any given month. I created this as a guide for an E-Z Zero-based budget process beginning with your expenses. Before you reach this level you need to brainstorm and list every bill or person you pay in a given year. Just grab a sheet of paper and start writing in no particular order or format
Start with a List of YOUR Expenses
Now that you have your list compiled, and know that it may not be in any way totally complete, as you open emails and look at your statements. Be sure you are reading each statement and putting any purchases you have made on your bank and credit card also on the list. Anything that is a one time expense put (1x) next to it. For the monthly expenses put an (M) next to it, and any expenses like car insurance – say your car insurance is $900 and you pay $100 for nine months, code that as (T100/9) which would stand for true expense paying $100 every month for 9 mos. Any credit or debt payments you make just put a (D) next to those.
Break List Down into Categories
Now, take your revised entries and break the list down into three categories – current, true, and debt. Be sure to cross them off the original list as you go. These are all listed put the amount you pay every month next to the current expenses. Take your true expense and list what you pay each month or need to set aside each month so you
have the funds when the bill comes due, and for any debt entries, list the minimum you need to pay next month with the due date next to it as well as the current balance you owe.
Add Any Debt You Currently Hold
Now the expense side of your budget for next month is starting to take shape, but you are a way from its finality Under the debt section, add your debts lowest to the highest balance. It may sound weird, but now I actually understand why I chose this method. As I work down the line paying one off at a time, it gives me the momentum and inspires me to just keep going onto the next one.
Be aware, it takes time to pay off debt and may seem frustrating. It has taken me to finally get down to 7 debt payments from about 20 since 2012, and I am not stressed now as I know where I am now, and where I am going. This is why I start you on the expense side first, you get to see just where you are spending and get to allocate your expenses accordingly.
Subtotal Current/True and Debt Lines
Now, once you have all your expenses categorized take and subtotal each section of expenses. Take a look and notice where all your expenses lie on the form. Take time to really study your expenses and see if you can find just ONE item that you feel you do not really need or are paying for and not using as much as you thought you would.
Contact that company and ask them to cancel their services to you, as you are trying to work out your budget right now and feel you don’t use them enough and just want to save money in this area for now. Not when the last time you used their services was, if you see you have not used them in 2-3 months, see if they will refund the last 3 months to help you with your new budget. You never know until you ASK!! What is the worst thing that can happen, they will say NO! But you don’t know, until you move forward and simply ASK them to do it.
Complete Next Months Budget with Total Expenses
Now total all your subtotal lines, and enter it at the end of the worksheet, This is what you need to be bringing in to support your budget next month. In the next lesson, you will be addressing just what you have to work with now and what anticipating your inflows to next months budget that your tallied the expenses for.
Okay, great job!! Go treat yourself for getting this far – get a coffee and donuts and just CELEBRATE the moment!