Income > Outgo

It may seem overly simplistic, but the true essence of a home budget consists of controlling your spending such that it never exceeds the amount of money you have coming in. Take a counter-lesson from the federal government. They, as well as some state and local governments, have been spending more than they take in for many, many years. And just look at the mess it has gotten us into. You don’t want to find yourself in this same mire. You might be saying, “Too late, I’m already deep in debt.” Well, it’s not too late. Most people start out with some level of debt. If you are just out of college and working at your first “real” job, you may have college loans to repay. Also, you probably needed a vehicle to get to and from work and other important destinations such as the grocery store, the doctor, and the gym. Unless you found a good car for a great price, you may owe money on it. And at some point you may have decided to invest in a home, especially with the deflated prices due to the recession. But you may also have found yourself getting caught up in the I-want-it-now craze and went wild with your credit cards. Whatever debts you have incurred, it’s probably time to make a plan to reduce that debt and get your spending on a sustainable path.

One very simple way of handling a budget is to just have a checking account and make sure you don’t spend more than you have in it. Well, that’s a start, but it doesn’t really help you to understand where your money is going each month and to plan for those expenditures that only come around every few months or every year. What is really needed is a way to categorize your expenditures, decide how much money is needed for each category, and then budget accordingly. When you do this, you may see where some expenditures are just not wise given your current income. For instance, you may realize that those car payments are too high or that the cost of gas, insurance, and license fees were more than you anticipated. Under such circumstances, you may decide that you will take on a part time job to earn the additional money needed, or you may decide to sell the car and buy a much cheaper one that is still capable of getting you from point A to point B.

In our next blog post we will present to you some expense categories that we personally use in our home budget and suggest others that may be appropriate for your situation.

DISCLAIMER

Before proceeding further, I need to provide this disclaimer.

The material presented on this blog is for informational purposes only. No guarantee can be made by the authors as to the effectiveness of implementing the suggestions provided. Everyone’s needs in budgeting vary. Therefore, the budgeting methods used by one person may not work as well or at all for another. What the authors can say is that the ideas presented herein have worked for them over the last 29 years. Should you decide to implement these ideas, hopefully they will work for you also.

All On Board

When one person is doing something for his own benefit and of his own accord, then he just simply has to decide he’s going to do it and stick to it. So, if you are a single person who has decided that you are mismanaging your money and are having a hard time bringing your spending habits under control, then the information presented here is for you. Following the advice we have laid out can help you get your spending under control. But you do have to make a commitment to lay out a reasonable budget and then FOLLOW IT. Those last two words are the key. FOLLOW IT! Just like any other decisions you might make in life to better yourself, they do no good if you wander off the path you have determined for yourself. If you need to diet to lose weight, then you can’t regularly binge on cookies and ice cream. If you need to lay off the alcohol because you have embarrassed yourself one too many times at “social” get-togethers, then you can’t drink a bottle of whiskey every day. Likewise, if you are spending money faster than your job is feeding it to you, something has to give. It’s time to lay out a plan and FOLLOW IT!

But what if you need to budget for a household? This can potentially be more of a challenge. One person in the household cannot simply decide to create a budget and then tell everyone else involved what to do. The others may not agree with how you have allocated the money. Hey, they may not even agree that a budget is even necessary. If everyone involved is not on board with the budget, then bad things can happen. We have heard of families where one spouse is trying to do the right thing in the way of budgeting, but the other spouse, not seeing the rationale behind it, just keeps on spending in the same way that caused the financial problems in the first place. Even worse, the not-on-board spouse may attempt to conceal his or her spending habits so as not to anger the on-board spouse. Of course, this cannot go on forever. But by the time the on-board spouse discovers the deception, the family budget may be in such dire straits as to take a much longer time to get it back on sound footing. So, it is very important for every relevant person to understand the importance and purpose of having a budget and to be totally on board with actually FOLLOWING IT. These people could be spouses or significant others, but can also include elderly parents living with you or even older children who have been given spending leeway, especially when this involves debit or credit cards.

In upcoming posts we will be explaining why it is important to create a home budget, how to create a budget, and then specifically how to implement it easily using spreadsheet software on a computer. But until you have completed the step just presented, getting everyone on board, then don’t even bother working on the these things. You can read the information so you can make your case for a budget, but setting one up without everyone else being on board will most likely be an exercise in futility.

Okay, so you say you have everyone on board? Good! Let’s get started.

Introduction

Hello everybody and welcome to our new blog. Our names are Randy and Kathy Finch. Back when we got married over 29 years ago, Kathy said she wanted us to start a household budget. Randy was a bit skeptical at first since he had been managing his money as a single guy fairly well without a budget. Fortunately, she was insistent because she had heard that many of the marital problems couples faced were money related. She did not want us to ever have a conflict over money. She wanted us to create a budget and only make changes that we both agreed to. So, Randy finally gave his consent. In the early 1980’s computers were just beginning to make their way into people’s homes. They had very, very little power compared to today’s multi-gigahertz multi-core processors and were quite expensive. So, our initial attempt at a budget consisted of a ledger book, a calculator, and a pencil. It turned out that our concept of how to do a budget was very good, but the pencil and paper implementation was a chore. We can’t tell you how many times our numbers just didn’t match our bank statement. Finding errors in entries or mistaken calculations were a real pain. However, when we eventually did get to switch our budget to a computer, things really got better.

Over the coming weeks we are going to be passing on to you the knowledge and skills that we have garnered over the past 29 years of budgeting. We will also talk about how to set up an easy-to-use spreadsheet to maintain your budget. Even though we now use Microsoft Excel for budgeting, any spreadsheet software will do, even some of the popular free ones. Our first electronic budget was accomplished using Microsoft Multiplan on a Commodore 64 computer. Later we bought a Commodore Amiga computer and switched to a program named Analyze. Then when we bought a PC, we began using Quattro Pro. We finally settled on Excel since it ultimately ended up being the standard spreadsheet software used at our places of work. So, as you can see, home budgeting can be done with limited computer and software power.

We will try to update this blog at least once per week. We will start with the basics of budgeting and build up to using software to accomplish this task. We will also eventually share with you the spreadsheet that we currently use for our personal home budgeting. We think you will find it very easy to use.

Randy & Kathy

P.S. Check out Randy's new novel, "Passion is a Harsh Taskmaster." It's currently available as an eBook at Amazon, Barnes & Noble, Apple iBooks (via iBooks app), and Smashwords.