The first thing you need to know when you create a budget is: what is your income? (If you don’t know, base it off of your worst month ever, and then the rest is extra! IF your worst month is $0, then use the worst month after you started making money.)
Then you need to look at your expenses. There are three types of expenses.
- Savings – 10% gross, invested.
- Fixed – emergency, mortgage, car, utilities, insurance, cable, cell phone, etc. These are the things where you basically know how much they will cost every month. [NOTE: These are NOT really fixed if you cannot afford your lifestyle.]
- Variable – groceries, gas, clothing, entertainment, recreation, gifts, holidays, assessor, personal, unexpected, etc. [NOTE: These are the things you know you spend money on all the time.]
While we were talking about the variable category, we talked about some of the things that we will spend but that people sometimes don’t budget for. For example, holidays. People spend money, whether they have it or not, for the holidays. She puts aside $100 every month, and treats it as though it’s already spent, and then in November or December or whatever, she deletes the lines of holiday expense money from her budget, and suddenly she has a nice holiday fund to go shopping with.
Also, she said that just for this June she has three weddings that she’s attending. She said there’s always money to spend on gifts. On the rare occasion that she doesn’t need to buy a gift for something, she buys herself one.
Where I wrote “personal” under the variable category, she had actually written “Troy/Alayna”. In her budget, she and her husband each get a certain amount of money to spend on whatever they want.
She hates having to pay $150 for the car assessor, so every month she puts aside $25, and then when she has to pay it it’s not as bad.
For the unexpected category, she told us a story. Across the street, they have these neighbors, the Jones’s. We’ve heard stories about the Jones’s before. Anyway, this time she told us they have a son that’s about the same age as one of her kids. (I think like 7 or 9 years old.) Here’s where the story gets awesome: their son’s name is
Anyway, the story ended up being about when her son came home from playing at Indy’s house, totally distraught. It turned out, he accidentally threw a ball that hit a statue, which happened to be a statue that Mrs. Jones’ dad gave her the week before he died. So Alayna talked to Mrs. Jones, and was like look, did your dad carve the statue, or can I replace it, or what, and I’ll replace it. So, a trip to Deseret Book and $350 later, things were a little bit better. Her son earns a $2/week allowance, and she told him it would be coming out of his allowance indefinitely. Heh. And then the same month she had a car problem that cost $1000 to fix, plus something else that was like $600, I forget what. And she didn’t have $2000 set aside that month for emergencies, but having set aside what she did made a huge difference.
She uses Excel and Quicken. It seemed like the important thing for all of it is to stick to the budget, and then also, don’t just rely on your bank balance. It may seem higher because things haven’t gone out, or because you’ve set money aside to go towards something, so you need to follow a budget instead of spending it because you think you have it.
We also talked about debt elimination, and it was basically the program where you get rid of your debt with the highest interest rate first. (If you don’t know how this works and want to, ask me and I’ll explain it to you or find some website that explains it.)
That was the end of our personal finance section, and then we started talking about taxes, that’s separate, but I’ll finish this post with some advice that Alayna gave us: Any time you’re in business, it’s always best to hire people better than you. It makes you look better. (So, don’t feel like you have to be the smartest and best; instead have an attorney that’s smarter than you, and an accountant that’s smarter than you, etc. Because like, they have your back, and they make you more awesome than you already are.