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Coupon Abbreviations
  • SC = Store Coupon
  • MC = Manufacturer Coupon
  • SS = Smart Source
  • RP = Red Plum
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Coupon Terms
  • WYB = When You Buy
  • B1G1 = Buy One Get One Free
  • .75/1 = 75 cents off one item
  • .75/3 = 75 cents off three items
  • EXP = Expiration Date

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 creating your budget step 1 a good hard look

Over the next few weeks we are going to spend time focusing on budgets.  It’s a word you have hated since you were 5 and your parents informed you that didn’t have enough money to buy a toy, now 30 years later it still makes your blood pressure rise.  No matter what your feelings about a budget are, it’s very needed.

I shared before Christmas that my mother was laid off, one week before Christmas was her last day.  She has never been great at managing her money, but now by force she is having to learn.  As I sat down with her that first night we looked over everything she was spending and weighed each item and it’s importance to her.  This is the first step we all need to take.  You can find a fun tip on Pinterest to start making your own soap, or knock $5 off a bill, but that’s not touching the problem.  If you don’t have the money, there aren’t enough quick Pinterest tips to make it to the end of the month.

To start fixing a money crisis we have to make a budget.  This is going to show you a few things, the first being exactly how big the crisis is.

Analyze Spending 

Look at your expenses from last month and assign them to one of the categories below.  Also ponder any payments that you make yearly so that they aren’t missed (car taxes, insurance payments). Here’s a free download from Dave Ramsey that might help.

To help you analyze spending every month try out a free program like Mint.com.  You hook it straight up to your bank account and it will categorize everything you spend.  It also has a budgeting tool built into it and they even have an app to alert you when you are close to exceeding your budget in certain areas.

Basic categories to use:

Housing (Mortgage/Rent, taxes, insurance):
Grocery purchases:
Household purchases:
Medical:
Transportation (car, gas, insurance, tax):
Utilities:
Electric & Water:

       Phone & Internet:
       Cable & Entertainment:
Clothing:
Savings:
Charity:
Debt Payments not mentioned above:
Miscellaneous:

Total Spent:

If you run upon something that doesn’t fit into one of these categories, that should be your first red flag that it’s not a necessity.  

Now that you have a picture of everything going out, compare your total out to exactly how much you have coming in.  If you are like 85% of Americans those numbers aren’t going to match up.  This is where the hard part comes in… you need to take a good hard look at where all this money went and make some decisions on what to change.  I will tell one huge category above that doesn’t feed, clothe or house you is cable.  Start there.  Just making one change and canceling one thing is enough to get you itching to cancel more.  Other things to drop are newspaper and magazine subscriptions as they come due.

There are also some big decisions to tackle.  As I sat down with my mother her biggest thing was her car.  She just didn’t have the money to make a large monthly car payment.  So she took the advice like a champ and is selling her car.  She will drive an older used car that we have for a while until she can find a new job and save up money to pay cash for a reliable used car.  For some of you this is advice that you need to take to heart, for others it may be even bigger, like it’s time to downsize where you are living to something you can afford.

If you are curious how much is a reasonable amount to spend in each category, here are some percentages of total income recommended by top budgeting gurus.  If you are way above percentage wise, that is a great place to consider how you can lower expenses.

Charity: 10%
Housing: 30%
Utilities: 5-10%
Food & Household: 10%
Clothing: 2-7%
Transportation: 10%
Medical: 5-10%
Miscellaneous: 1-2%

That hopefully will leave 13-23% that can go into savings or paying off debt.

Making a Budget

With everything categorized out, you have already done most of the work.  You now see what you are spending compared to what you are earning.  The goal for your budget is to think on a month to month basis how you can make those match.  Using credit to make them match isn’t going to work here, you have to do some work and actually make them match with real money.  If they don’t match no matter what you try to give up, then you have two options you either dig deeper and give up big ticket items or you make more money.  I know it’s not that simple to do, but in reality you have known that it came down to these two options for a while.

A few things to keep in mind when making a budget:

  • You have to do this with your spouse.  You need to both be on the same page and in agreement with where your money is going.
  • Your first month of living on a budget is the hardest.  You will continue to make small changes to categories and amounts for the first few months.
  • Make sure to leave some money in a miscellaneous category, even it’s a tiny amount.  This is like trying to diet by never eating dessert again.  You won’t make it with some room for things you forgot about.

I would love for all of you to chime in on how you made your first budget or tips that you have for anyone that far exceeding income.  Hearing others stories is many times the motivation we need, so please share!

Each day this week we are going to tackle a category above and some big and small changes you can make to decrease expenses.

    • Chelsea

      We have an Excel sheet we have used for years, and I can take my spending from the previous year to project necessities for the next year. It helped us to buy our first home, and keeps us honest about how much we make and how much we spend.

    • pdnr

      The one category I don’t see that I have is “Gifts.”
      I’ve been doing this for 18 years and the first time I made a list of my estimated expenditures I was shocked when I totaled them how much higher they were than my income! I had to redo my budget several times before they equaled out. This really does help and setting aside specific amounts each month prevents sticker shock when taxes, insurance and unexpected repairs need to be paid. The money has been set aside to cover them. I have 11 accounts that I track using Excel spreadsheets. One requirement I have is that my credit card must be paid in full each month.

      • Sarah

        Gifts was the first thing I thought of too that wasn’t there. It helps to budget a little each month for the extra expense.

      • Bee

        I wonder where vacations are? Or even going to see family on the holidays? Do you just make your transportation stretch? Our gas bill is already too large (less than her recommended but we don’t have a car payment AND my hubby drives a company car). I can’t figure out how to get it down since I feel most of my driving is “essential” (taking kids to school, going to church and the like). Good list to get me thinking.

        • pdnr

          I include vacations in my entertainment expense. (Decide whether you want to blow $30 on a meal out or save it for a vacation. It’s all in the same account.) Gas for vacations would also come out of entertainment.

          • Mommyof1

            I agree. If we want to take a “vacation” (usually just a 3 day trip). I try to figure out how much we would spend.. say $500 on a trip to the beach.. we cut back on everything. We eat organically, so it’s hard, but we have many meatless days in order to make our food bill smaller. We do not go out to eat, or go shopping unless it’s a need – so little chance on splurging on nonsense if we stay at home. If we have not reached our goal when it’s time to book the hotel etc.. then we simply do not go on vacation.

        • Kim

          I realize everyone’s situation is different, but our budget does not allow for a monthly allocation for vacation either. However, my husband gets a yearly bonus, and we usually get a tax refund. We use these “extra” paychecks for things like vacation or Christmas savings. If nothing likes this comes in, maybe there would be a chance to work some extra hours from time to time. Blessings!

    • sjgsjg

      My goal for food and household for two adults and a teen is $4,000 per year. Should I be doing better than this?

      • That’s not bad at all, as far as couponing goes I am able to do our family of 6 (4 younger girls no teens) for around $250 a month or $3000 per year.

        • Andrea Butler

          Holy smokes. That is a low number. I clearly need to try to catch that number, white rabbit. :0)

    • Sarah

      Wow, I just looked over my budget. Amazingly, I am sort of close to the percentages you listed above for “reasonable” spending. We are only a one income family, so I thought maybe we would be spending more than we should in each area. Our savings is not quite 13%, so we are a little over what the gurus recommend , but overall, I am pleased, Thank you for this info.

    • Marie

      Are those percentages from take home income? What about taxes?

    • lila

      People think I have lost my mind. I gave it all up last year. I let the house go to foreclosure and moved my children into a small 2 bedroom apartment. The cable was cut, the fancy cellphones were let go. I mean I cut everything to the bone and started over. In three months we will be moving into a small house I bought at auction. It is not fancy like our former home but is a lovely Paid in full home. Admitting you over in over your head is good but you must be willing to make changes. Thank you for sharing your stories. There is no shame in beng honest. i am out of debt and will stay that way.

      • Teresa

        Congratulations on tackling your debt and especially on buying a house for cash.

      • Rita

        Go, Girl!

      • Jen Beaver

        well done! Thanks for sharing.

      • hhbeverly@yahoo.com

        Yeah for you – many of us are envious of your new position!

      • Cindy E

        Way to go Lila! Most people live way beyond their means, trying to keep up with their neighbors. My husband and I decided before our first child was born that I would stay at home and we would manage with one income. 21 years later we are very happy with our decision. The first step is the most difficult but look at you now!!

      • Toni M

        Sometimes, walking away is the best thing you can do for yourself and children, and starting over. I have thought about doing the same with my house. My mortgage payment goes up along with the cost of living while my pay checks get smaller and smaller.

        • Toni M

          Congratulations to you, Lila!!!!

    • Shannon

      Where do you put child care? My child care is right at 25% of our take home pay. It’s huge. We have almost no debt outside our mortgage and student loans, so we make it work.

      • Jessica

        Our daycare expenses alone account for 20% of what we spend. We spend more on childcare than we do on our mortgage. I had to reconfigure the budget to include that. I just did not feel comfortable cutting back on the quality of school.

    • Tennessee

      Don’t forget to take a small percentage for blow money. You’ll never be able to stick to a budget that has you working, working, working with no money for even a matinee or a Subway sandwich.
      I traded cable and Red Box for a Netflix streaming subscription and saved a TON of money.
      Forget the interest rates, just work on paying off the smallest bill first. It will give you great satisfaction to know that you can really do it.

    • Shannon Baker Hummel

      The BEST advice ever is to read Dave Ramsey’s book The Total Money Makeover and take his course called Financial Peace University . amazing …

    • mariajs

      My housing is almost 50% of our income, it makes things really tight. But we selected an aggressive mortgage, and it is our only debt and we’re trying to get rid of it as fast as possible. The other thing that’s not on that list is education. Right now we pay tuition that’s about 20% of our income. Cable, subscriptions, phone….those things have been gone a long time. THe other thing to consider, I how you can increase your income. I do some teaching on the side from home, and am beginning to do some freelance content writing for an educational publisher. I never budget those things, because they are not regular enough (can’t be sure the dollars will come in), but they pay for our “fun” things and add to our savings.

    • SaraJ

      Childcare is what gets me as well – no budget example ever seems to include it. We’ve got a 2 year old now and twins on the way so we are trying to build a new budget having 3 in daycare soon. Should we just subtract the daycare total from our income total and then apply the %’s to what’s left???

      • Susie

        Even though my kids are in college now, the first thing I noticed is the fact child care was left out of the budget above. For working mothers that is a big expense. When my kids were young, the monthly day care expense was more than our house payment. It was our largest single expenditure each month.

        • SaraJ

          HUGE! And even when kids start school, before- and after-school care are still not cheap. I wish more budget examples addressed it because it seems overlooked.

    • Lauren Wickersheim

      My husband and I have been watching our money since we got married, but this month is the first month we’re really tackling every penny. My husband (the business grad that he is) made a spreadsheet that lists every category in our budget, and what we’ve allotted for it. Then on the next page there’s a place to enter in every purchase we make (with a note for date/what it was) in each category, and then the spreadsheet keeps a running tally for each week over on the budget page so we can see what we’ve spent and what we have left. It’s working. First month so far that we haven’t been overspending our budget categories. I’ve been using Mint.com for years and LOVE it, but it’s a little easier to fudge the numbers there. :P I like the combination — I use Mint just to keep track of all our different accounts/CCs, etc., but the spreadsheet is our real power budgeting tool. We try to sit down every couple nights, enter in everything, and make sure everything is still lining up.

      I work full time, and my husband has two part-time jobs until he gets into graduate school. We have a bare bones budget — we rent the cheapest (safe) apartment we could find in Tampa, we don’t have cable, we have the cheapest internet we could find, we keep our thermostat up to keep our electricity bill down, we share a car and have discounted insurance through USAA, and we share my in-laws’ no-contract phone plan and just pay them our portion every month. We have to shell out more for the phones up front (we’re actually getting two “new” used ones this week), but it’s much cheaper in the long run. I have a very conservative food budget (thank you Jenny!). But we do allot some money each month for recreation – that’s important! Through my husband’s job, we can go to Busch Gardens or SeaWorld for just the cost of gas and food, so that’s a fun weekend date!

      I wish I could say with being so tight we’re paying off lots of debt and student loans. We’re chipping away at it, but right now we have to do all this to make the numbers match. But that’s okay! We’re blessed and doing fine. Southern Savers has truly changed our life and budget! Thank you!

    • beckyd423

      In my marriage it took us a while to work this all out because the idea of being restricted really freaked my husband out. He felt like he works hard, so he should be able to treat himself. We had to really take a look at personal spending and determine what would be included in our “mad money” and what would come out of our joint categories. If this really terrifies your spouse (or you), I would advise you to be as flexible with your definition of personal spending as possible for your family. There is no right way and no wrong way to do this. It took several attempts for us on this particular category, but we finally worked it out with open honest communication.

    • heather Peterman

      We are a one income family with only about $2000 to 2200 a month coming in. Our bills add up to roughly 1800. That does not include grocery, household, gasoline or any fun related things. We do not have internet or cable. What do you suggest for us? I have been a stay at home mom for 13 years and have no work experience outside the home. I cannot justify paying childcare for a minimum wage job.

      • Chelle

        We have been in this same boat for years. We never could justify my going back to work because any job I would get wouldn’t pay me enough to cover the daycare costs. I have no real advice for you except to say that after 20 years of being in this situation, I wouldn’t change it if I could. The time I spent with my kids and the result of my being home with them is worth all the struggling we have endured. They are wonderful, well-rounded, smart young adults now and that is worth every sacrifice my husband and I made. I know this may not help you, but know that I think you’re making the right decision to stay home with your kids!

        (Anyone who doesn’t or can’t stay home with their kids, please don’t take offense to the above. I mean no disrespect to working mothers. On the contrary, I truly don’t see how you do everything you do and you are to be commended for being able to handle it all.)

      • Tennessee

        if you’re married, why would you need to pay daycare? You work when your husband is home, he works when you are home. It’s not ideal, but it’s a solution. Also, research what you can do at home to make money. Can you sew/alter clothing? Can you provide a working mom w/after school care? When you’re really motivated, there are a lot of ways to make a buck.

        • Susie

          We live in a very small rural mountain town. There are no jobs that offer second or third shifts here. If you work, you work during the day, just like your husband.

      • mariajs

        What bills are included in that $1800? Could you refinance a mortgage with a longer term to lower the bills? Its not ideal to stay in debt longer, however, if it can help you not be in the red each month on your groceries, etc, it may be worth it. How about phones? We don’t have a home phone, just a cell. Look around for cell phone plans, we just switched from ATT to Consumer Cellular (same towers) got a better plan, with texting that we didn’t have before (YAY MOBILE COUPONS!) and actually are paying less by about $10 a month. As for getting more income, how about babysitting? Do you do any of the paid surveys? (Its not a lot, but the $12 I get every month or so is a nice little treat.) How about crafting? You can open an Etsy store. Are you good at any particular subjects? There’s online tutoring you may be able to do. I’m a stay at home mom, too. I taught for 5 years before I stayed home. Working outside the home is not an option for me right now, and I have been looking for over a year for a “job” I can do from home, I just last week got an opportunity to do some content writing for an educational publishing company. It took that long, so don’t give up!

      • mariajs

        What bills are included in that $1800? Could you refinance a mortgage with a longer term to lower the bills? Its not ideal to stay in debt longer, however, if it can help you not be in the red each month on your groceries, etc, it may be worth it. How about phones? We don’t have a home phone, just a cell. Look around for cell phone plans, we just switched from ATT to Consumer Cellular (same towers) got a better plan, with texting that we didn’t have before (YAY MOBILE COUPONS!) and actually are paying less by about $10 a month. As for getting more income, how about babysitting? Do you do any of the paid surveys? (Its not a lot, but the $12 I get every month or so is a nice little treat.) How about crafting? You can open an Etsy store. Are you good at any particular subjects? There’s online tutoring you may be able to do. I’m a stay at home mom, too. I taught for 5 years before I stayed home. Working outside the home is not an option for me right now, and I have been looking for over a year for a “job” I can do from home, I just last week got an opportunity to do some content writing for an educational publishing company. It took that long, so don’t give up!

    • Chelle

      How do you budget when you don’t have regular income? I’m a stay-at-home mom and my husband only gets paid when he works and only works when he gets called to work. If things are going well, he makes pretty good money. If he doesn’t get a call to work, he doesn’t make anything. I find it really hard to budget when there’s no way to foresee what he’ll bring in. Anyone have suggestions?

      • Jennifer h.

        One idea that I have seen is to put his paychecks into a savings account when you get them and then only transfer the amount of money you need for the week or month into your checking account. Any extra stays in the saving account to be used for those weeks when he doesn’t get paid. Also another idea is to make a list of necessary expense starting with food, housing, utilities, etc. When he is paid, start at the top of the list and work (pay) your way down to the less important items. I think that in Dave Ramsey’s Total Money Makeover book he addresses budgeting with an irregular income.

    • Susie

      What works best for me is to not over think it. Simplify. Things like electricity, water, heating oil, set monthly bills are necessity so don’t try to over think or set strict budgets that may be unobtainable at times, you will get disheartened and throw the budget out the window. The way my family is able to save is simple. Monthly bills are paid out of the checking account. Anything else we consider discretionary spending and for that we pay cash. Each week I withdraw $100 in cash and put in an envelope. From that envelope comes groceries, gas, redbox, etc. When the money is gone, it’s gone…until the next week. Meanwhile, your bank balance goes up month after month, or use the extra to pay down debt. You’re not stressed by the budget. Never carry a balance on a credit card. If you can’t afford to pay it off at the end of the month you don’t need it and the build up of extra money in your account covers those things that can pop up like your dryer tearing up or your car broke down.

    • claudia

      Dave Ramsey has the best budgets, they’ve kept me organized for years.

    • Nancy

      Are those percentages above based on gross or take home?