Starting with a Small, Simple Budget

Starting with a Small, Simple Budget

Jun 21, 2016 | Quitting your 9-5 | 0 comments

This Post may contain affiliate links. For more information please read my disclosure.

Start With Your Income

If you’re budgeting for the first time, trust me, I know it can be overwhelming. But we have to take it slow and methodically.

Start with a small simple budget and grow it from there.

To start, when it comes to income, we tend to have only slight control over what amount of money we have coming in. But I propose that it’s less about the amount of money we have coming in and more about how we control that resource.

Of course, having extra income can improve our lifestyle or allow us a bit more freedom to spend our money but no matter the amount of revenue we have coming in, it should be spent in a controllable way.

If you’d like to jump into how to start a side business for extra income, read: Earn Extra Cash and How to Work from Home blog posts.

Having a budget is not just about knowing what your bills are and making sure your bank account has enough money to purchase whatever it is you want at the time.

Having a budget is about controlling the distribution of your income so that your purchases are not determined by ‘if I have enough money,’ but rather, ‘have I created intentional space in my budget for the purchase I’m about to make?’

I understand how silly this can sound but it’s really a simple concept that most of us easily miss. We let the number in our bank determine the amount or frequency of objects we can buy.

This leads to an empty bank account nearly every month before we get our next paycheck and it often leads to a paltry savings and investments.

Isn’t that frustrating?

I remember attempting to save extra cash in my bank for emergencies and always feeling that no matter how much extra money I made, or raises that I got, the money flew out the back door of my bank account faster than it was deposited into the front door. What gives?

The Budget

It took my wife and I enough heartache and overdraft fees to realize that if we didn’t tell our cash where to go, our cash would instead determine where we go.

In 2010 Ariana and I went through Financial Peace University, authored by Dave Ramsey and offered by some churches out there. At first we thought that there isn’t that much this class could tell us that would revolutionize the way we handle our money. After all, they’d probably just tell us to stop going to restaurants and stop buying expensive things which I’m sure we could do eventually without their help.

We were wrong.

What we put into practice then has drastically affected the way we look at life, the way we spend and the way we view money. Why is it so difficult for us to be transparent and intentional about the amount of money we make, spend or save?

I think it’s somehow tied to our identity.
It’s the popular phrase, ‘keeping up with the Jones’s’ that helps us focus on what we lack instead of the abundance that we’re truly surrounded by.

So how do we and did we budget in a way that helped us gain control and make progress toward our savings and retirement goals?

Living Paycheck to Paycheck

Here comes the challenge.

If you’re dealing with finances that are mainly paycheck to paycheck and often frustrating at the end of the month, how much time are you willing to put in to making a change?

Some simple homework I suggest is to print out your bank statements or credit card statements. Sit down and write down each of your expenses and give it a total number. How much are you spending on groceries? How much on entertainment and dining? What are your fixed bills like gas, power, rent or mortgage etc?

Once you are aware of all the areas you’re spending your money and the amount in each category for every dollar you spend, compare the total spent to your total income. Scrub through each item and determine which is a bit excessive or where can some spending be improved.

Next to each variable item that you can pay in cash instead of swiping a card, mark it with a dollar sign ($). Let’s use net income for simplicity. Here’s the first example:

  • Net Income: $4,000
  • Giving: $400
  • Rent/Mortgage: $1200
  • Utilities: $300
  • $ Groceries: $620
  • Various Insurance: $350
  • $ Entertainment/Dining: $650
  • $ Gas: $250
  • $ Clothing: $100
  • $ Furniture: $100
  • Cell Phone: $100
  • Gym Membership: $30
  • Minimum Credit Card Payment: $100

Surplus/Deficit: -$200

By writing this out and taking note of where the majority of your cash is going, you can get a better understanding of what may be putting you over your budget.

For example, spending $650 on monthly entertainment seems a bit excessive. Why are we spending so much there? Is it the daily fast food expense or coffee runs? The nightly food with friends at reasonably expensive restaurants?

If we do this each month we run a $200 deficit that likely gets covered by our credit cards. So what are the dollar signs for?

Want some further help on getting the budget going? Check out my 7 Day Budgeting Course.

Instead of swiping our card to pay for each of these categories which gives us little to no control over our spending, let’s add up what we’d like to spend, reduce our expenses in these variable categories and add a couple other categories like savings, investments and more to debt repayment.

Once we get paid, lets withdraw from the bank the appropriate amount of cash in percentage relationship to our bi-weekly income of the items marked with a $ and let’s commit to only spending that amount for this pay period.

Here’s a second example:

  • Net Income: $4,000
  • Giving: $400
  • Rent/Mortgage: $1200
  • Utilities: $300
  • $ Groceries: $420
  • Various Insurance: $350
  • $ Entertainment/Dining: $300
  • $ Gas: $200
  • $ Clothing: $50
  • $ Furniture: $50
  • Cell Phone: $100
  • Gym Membership: $30
  • Savings: $200
  • Investments: $200
  • Credit Card Payments: $200

Surplus/Deficit: $0

You’ll notice I preemptively dropped my spending estimates in Entertainment/Dining, Groceries and Gas to make room for the new categories that I’d like to add.

Given the dollar signs, we withdraw $1020 or less bi-weekly, and allocate the appropriate cash to envelopes with category names on each of them. If we go to the grocery store, we take cash. If we go out with friends, we take cash. If the entertainment envelope is out of cash, we don’t go out anymore until we get paid again.

Now that can seem restrictive can’t it? But let’s look at the payoff.

We still get to go out and eat well but we’ve added three new categories to our budget: Savings, investing and an increase in debt payments. How much better would the end of our year look if we made a commitment to giving each dollar a name instead of letting our bank account balance determine our spending?

Close your eyes and imagine savings and investment accounts that grew by nearly $5000 or about 10% of your salary this year and your credit cards were paid off simply because you told your money where you wanted it to go.

I think that’s better than counting the bucket of pennies at the end of the year.

Did you start your budget in a similar way? How did it help you gain control? Let me know in the comments below.

Being disciplined with your money is hard but trust me, it's worth it. -Brandon

Being disciplined with your money is hard but trust me, it's worth it. -Brandon

I’m Brandon and that’s my bride Ariana and our first born. We listened to age-old wisdom and paid off over $100,000 in debt from college, credit cards, vehicles and an underwater mortgage in under two years. We now we live a debt free life. Now we’re able to spend more time at home with our kids and prioritize our life.

Join Thousands of Readers!

Popular Posts

Blue Host Web HostingWordpress Divi Theme Wordpress Divi Theme Wordpress Divi Theme Wordpress Divi Theme Wordpress Divi Theme


Submit a Comment

Your email address will not be published. Required fields are marked *

©2018 BeardedBudget - All Rights Reserved | Privacy Policy | Disclosure | Disclaimer

With BeardedBudget, I have developed a number of financial and merchant relationships; some of which are affiliate relationships. The opinions expressed here are mine alone and should not be construed as professional financial advice but honest reviews and recommendations based on my own experience. For more information, read the disclaimers and disclosures.

Ready to Jump In?

Get on board our mailing list so we can keep you updated on the latest content, tips and strategies toward a BeardedBudget lifestyle. Before you know it, you'll be a part of the BB family. Just remember, you inspire us every day with your stories so let us know what you're up to and how you're being challenged.

We're believers in the importance of privacy and respect. We'll never share your email or information. We look forward to seeing you around!

You're now a member of the BeardedBudget club. Keep in touch. We want to hear from you!

Free Bearded Budget Startup Guide

This is the secret info to building a more fulfilling lifestyle, reducing your expenses, saving more money and spending more time doing what you love. Getting started is half the battle. Use this guide to jump start your Bearded Budget life.

Awesome! Your eBook is on its way!