How to budget to fit your income – Part 4: Whats left…
Now to budget everything else. You’ve done the essentials, all your bills and debts are allocated, now for any travel you have to do, cars and maintenance and building up some funds for those regular expenses so you’re not caught out when Murphy comes calling.
You need to get to work or college or somewhere, so planning for trips to the shops, etc., is essential. If you have a car or motorbike, this will be things like car tax/insurance and fuel (don’t worry about MOT’s, that will come in a moment).
You may need to get the bus or train, so budget some funds towards that (look back and see what you have spent on these within the last three months to give you a starting guide). Right now I’m not going to go into saving money, but at this point you could maybe think about it, walking the kids to school, walking up the shops and a bus back, small things. But mainly, get the costs written down.
Now here, you will just be putting names, no figures, we’ll work those out after, but until your debts are paid off, you won’t be saving anything except an Emergency Fund, which I will be covering in Part 5.
The name may be new to you, but you may already know the concept. At first, you will just be creating sinking funds for those things that come around each year, but you can build these up as part of your Fully Funded Emergency Fund (FFEF – I will cover this in another post later on) once you are debt free.
Take Christmas for instance. It’s there every year, 25th December, without fail, but come October and we’re all like “I HAVE NO MONEY, WHAT AM I GOING TO DO!”. This is where sinking funds come in.
If it’s January and you want to spend £500 at Christmas, then you know you need to save £500/12=£42 a month, or £10 a week, easy. If however it is September, you’re obviously going to need to save more than that. So using the formula above £500/4=£125 a month or £30 a week.
You need to use this formula for whatever you NEED to save for that occurs every year so you are ready for it – your car’s MOT (see, I told you it would come up), new clothes (keep to a minimum when paying off debt), Birthdays, Haircuts, Home Improvements (boiler cover, etc).
At this point, I won’t stress the fact that you are trying to get debt free so try to be careful here, I will explain more about that later, but for now, think of the things that you usually go to your CC’s for and look to plan for these things as much as possible.
Fun and games…
OK, this is where your hard work pays off. You still think you deserve something for yourself after putting in 12 hour days this week or walking the kids to school – well, budget it in then!
There are things that you shouldn’t do, no matter what, when you are in debt – take holidays, weekends away, eating out, buying loads of stuff, etc., as all your spare money should be going towards your debt, but as long as you have put money aside on the budget, the occasional treat is fine.
Now you may be debt free, in which case you will have more to play with, but there are more steps on the Dave Ramsey plan, so it may be worth checking those out first.
Here’s an example of what you should have with all that filled in:
As you can see, there are lots of spaces for you to add additional stuff and really make it your own. If you need any help with the formulas or adding/removing rows or columns, drop me a line.
So there you have it, your budget is done – everything is listed, we’ve just got to make sure we’ve allocated every penny and start saving for that Emergency Fund and Debt Snowball…