Introduction to Budgeting
This is a three-part series on budgeting. Part 1 explores the need for a budget, the spiritual direction given us by the prophets and how to figure out what you currently spend. Part 2 explores ways to turn this information into a budget, including ways to cut costs. The third part explains how to survive on your new budget. Navigate the three parts by following the links in this paragraph.
Budgeting isn't one of the more glamorous goals. It's not as much fun as resolving to go to Spain, for example. On the hand, a well-executed budget might make the trip to Spain a reality. Unfortunately, in today's society, most things take money. Seldom can things like rent, food and shoes be bartered or made completely at home using found materials.
Creating a budget is essential even when you feel like you have plenty of money without a real plan. What will you do when your plan falls apart? Most people are only weeks away from homelessness, and in a crisis, you can't depend on others to cover all of your needs. It is irresponsible to decide that family, friends and the church should care for you when things go wrong, if you have not already done everything you can to prepare for the day of crisis. "The responsibility for each person’s social, emotional, spiritual, physical, or economic well-being rests first upon himself, second upon his family, and third upon the Church if he is a faithful member thereof. No true Latter-day Saint, while physically or emotionally able, will voluntarily shift the burden of his own or his family’s well-being to someone else." Spencer W. Kimball (Ensign, Nov. 1977, p. 77.)
Any number of events can upset a precarious bank account, including unemployment, illness, or a broken major appliance. While most people do have credit cards, they increase the cost of the expense greatly if they cannot be paid off immediately. A budget is an essential part of God's plan for us. We can't be self-reliant if we don't even know what that costs.
For most people, the challenge is figuring out where the money goes. Most of us would be unable to give an accounting of our expenses throughout the week if asked. Usually, the amounts we spend in each area are far more--and occasionally far less–-than we believe they are. In order to build your budget, you will need to find out how you currently spend your money. The simplest way to do this is to begin with your regular bills. Go over each bill for the past year and obtain an average for each one. For instance, start with your electric bill. Suppose you spent 100 dollars five months, 75 dollars two months, 50 dollars three months, and 80 dollars the remaining months. Add all those totals to see how much you spent in one year for electricity. Now divide that number by 12. That tells you about how much you spend each month on that bill. Some months are higher and some are lower, but over the course of a year, it averages out. Realize this amount is not guaranteed. Your bill may go up or you may need more electricity one year. This is only a starting point for your budget. Add all the bills and average them to find out how much to budget for bills each month. (If you use the average instead of the maximum, do not spend what is left over in a less-expensive month. You will need to save it for the months the bill is higher than the average.)
Next find out what you spend on everything else. To do this, save all your receipts. Put an envelope or small change purse in your bag and toss all the receipts into it during the day. Be sure you get a receipt. If you do something that doesn't come with a receipt, write it down on a piece of paper kept in the change purse. Each evening, transfer those receipts and numbers to a safe place at home. At the end of a week, total them and assign them categories: food, entertainment, fuel and so on. At the end of the month, create a record showing you where the money went. Many computer programs will design a pie chart that quickly shows how much you spend on each category compared to the others and some will even show you the ideal plan so you can compare.
Next, think about the way you are spending your money and decide if you are comfortable with it. In the following article, we will discuss ways to use this new knowledge to create a budget.