Get Your Household Budget Up and Running in 30 Minutes or Less

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Woman using calculator with laptop
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Few activities are more hated than standing in line at the DMV -- and one of those is budgeting. But how did budgeting get such a bad rap? Well, for one thing, many of us avoid it because it's seen as a chore that will take up at least half our day, fighting tooth and nail with our inner spending demons (or our spouses). But that, friends, is a fallacy.

Or at least it should be.

It's time to clear up some misconceptions and get to the heart of what budgeting really is -- quickly. We'll show you how to set up your first budget, or get back on the budgeting horse, in 30 minutes or less. Ladies and gentlemen, start your stopwatches:

Step 1: Understand What a Budget Is (1 minute)

Simply put, budgeting means putting a name to every dollar that goes in and out of your bank account. Usually, a household budget is broken down monthly, as spending needs fluctuate, and regular benchmarks can be tracked and compared. Get it? Got it? Good.

Step 2: Calculate Your Projected Monthly Income (5 minutes)

If you have just one consistent source of income each month, this step will take just a few seconds. If you have multiple sources of income, it might take a few minutes. And if your income varies from month to month, you'll need to use the figures from previous years or months to estimate what your monthly income will be.

Step 3: Estimate Your Monthly Expenses (20 minutes)

You can be as detailed or general as you'd like to be in calculating your expenses: The important thing is to make sure every expense is accounted for. For instance, you could set down a rough estimate for your overall spending on utilities.
Or you might prefer to break it down by individual bills such as electricity, water, gas and phone.

You may have only a vague idea how much you spend each month on some categories, such as food. So start by taking a guess. Remember: Your first month on a budget is a trial run. If you end up spending more or less than that amount, adjust your target number for the next month. You'll likely need to reallocate money among categories early on.

Right now you might be thinking, "But I don't even know what I spend my money on!" That's OK. If you need help breaking down your spending, take a look at the types of expenses from your most recent bank statements. Here are some common categories to get you started:
  • Mortgage/Rent
  • Utilities
  • Food
  • Transportation
  • Entertainment
  • Debt Payments
  • Medical
  • Insurance
  • Clothing
  • Savings
  • Pet(s)
Here are two other categories for couples:
  • Personal (We give each other $25 of "whatever" money each month to spend as we please.)
  • Miscellaneous (There's always at least a couple of expenses that don't quite fit in any category.)
The goal here is pretty simple: Spend less than you earn.
In order to estimate your savings for the month, add all of your expenses together and subtract that number from your monthly (net) income. The number left is your projected monthly savings.

Step 4: Decide How You're Going to Keep Track (4 minutes)

Now that you've given every dollar a name, figure out how you're going to hold yourself accountable. Will you keep a spreadsheet? A notebook in your purse? Or will you use a smartphone app? Whatever you choose, it's important to record every expense as it happens. (I hear you harrumphing in your cubicle. Yes, you with the bag of Funyuns. But recording your expenses is really quite painless if you do it as it happens. It takes a matter of seconds.) We use a phone app, which means we just enter the expense, and the app does all that math stuff for us. Can I afford those expensive chocolates for Valentine's Day? This month, my budget and my waistline are both saying "No way, Jose." But that's not my name, so it's still up in the air. Still, if I do get those chocolates, I'll record them in our budget-tracker right afterward.

1, 2, 3, 4: Now, you're a budgeting pro. And you can do all that and still have half your lunch break to waste as you please. Keeping a budget may take some getting used to, but you're already on your way to smarter money management.


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bhoff

Goodness knows, have you sent this budgeting articile to the President and Congress? They certainly don't have an idea about budgeting. My debt limit is well, you know, set by the other responsible parties that I live with who understand what it takes to repay the promisses I make. But the people of these United States of America don't know what a trillon dollars looks like or can buy? $ 1,000,000,000,000 most countries of the world live on a lot less! I love this country of as long as this government will allow it to last... the light at the end of the tunnel is getting dimmer!!!!!

February 19 2014 at 8:07 AM Report abuse rate up rate down Reply
Jim

When your means is a job that hasn't given you a raise in a decade and you can't find a better one, but your ends keep going up it's damn hard to live within them. We have already cut out going out, dish tv, garbage pickup, movies, concerts, and buying anything except groceries and gasolene! And that's working 50 to 60 hours a week plus doing odd jobs when I can. How is a budget going to help me?

February 19 2014 at 5:37 AM Report abuse +1 rate up rate down Reply
Steve-a-rino

Is this great advice aimed at the 25 percent of Americans who make less than poverty wage? The rich already know how to manage their money or they wouldn't be rich. Everyone else isn't rich but wants to be (or pretends to be) and that is the real problem. There was a time when people lived within their means. What a radical concept!

February 18 2014 at 4:42 PM Report abuse +2 rate up rate down Reply