Budgeting

Budgeting has allowed me to direct money to where I want it to go and to erase debt quickly. It also has helped me to stay out of debt. Especially credit card debt. I probably could stop budgeting at this point and stay out of debt. I'm not sure I trust myself completely to do this all by myself and in my head.

But I'm not going to stop because I really like knowing exactly where my cash is going. And being able to leverage my budget to erase debt and build wealth is an awesome feeling.

Here's How I Do It

I actually start creating my budgets several months in advance by planning out the next 3 to 4 months of budget sheets. I use Excel and I take my current budget file and copy it 3 or 4 times and I aim to have the general framework established months in advance per budgeted month. Here are 4 specific criteria I aim for in each budget:

1. Make sure it is a good representation of what can potentially happen that month. For example, when creating my September budget I am entering line items in preparation for Christmas presents, Christmas tree, and food for the Christmas dinner. These line items are not needed in the summer months and therefore you would not find them on my June, July or August budget sheets.

2. Attempt to estimate my utility payments based on last year's budget. Fall and winter I see higher gas bills due to running the heat (furnace) and the gas fireplace. Summer months see higher electricity bills due to the air conditioning. Spring is usually the least expensive because we generally do not use the furnace or the AC.

3. Do a little housekeeping. I make sure the month and year are correctly reflected on the budget sheet. I remove any extraneous dollar amounts or line items that no longer apply or are out of date.

4. I don't try to have the perfect budget at this point. Perfectionism this early is just a waste of time. Just get the budget sheet in general shape so it is ready to go when the month finally arrives.

5. File the budgets in my budget folder on my computer. Try to stay organized.

Your Call to Action

- Properly preparing your budget in advance is key to successfully budgeting and erasing debt. Here are some do's and don'ts for creating your own budget.

- Don't make your initial budget so tight with the incoming/outgoing money that you feel locked into an unrealistic plan. Just get your estimated income/outgo down on paper (or electronically) in preparation for when the real month comes.

- Don't leave unrelated items on your budget sheet. If it is December and you are creating a budget for March, you do not need the line item for a Christmas tree on your March budget. Take it off.

- Do try to take a guess at what your month may look like. If you know your garbage removal fee will be due in March, make sure you include that. If you are due a commission in February, make sure to include that on the income side of the form.

- Do keep it simple. Keep your budgeting sheet simple and easy to use. Customize to fit your own style of doing things. Your brother-in-law's complicated Excel budget form may be easy for him but a nightmare for you. Be sure to make your budget your own and use tools you feel comfortable with.