Reverse Budgeting

Monthly Budget Worksheet

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Everybody agrees that budgeting yields BIG results.  But that’s only IF you can stay on your budget.

I’ll admit that I’m a bit of a spender.  And I do have a budget but I’m very creative at finding ways around it.  Yes, I know.  That defeats the purpose.  But the truth is, even when I fudge a little, I still do better than if I didn’t have one at all.

But that’s not the point of this post.  There’s a third budgeting step that I think is even more effective, at least for me, than the first two steps (1 – create a budget; 2 – follow a budget).  It’s what I call reverse budgeting.

It’s really very simple.

1.       At the end of your budgeting period, sit down with the record of what you spent (yes, you have to keep track for this to work) and figure out how you did overall on your budget.  Let’s say you had $1,000 to spend on non-bill items but you spent $1,200.

2.       Now start going over each item.  You can simply go line by line or you can get a little fancier and group the spending by categories and then review categories.  It doesn’t matter.  However you want to do it.

3.       As you’re going through the list, keep in mind that you were over budget by $200.  See if you can find $200 of items that you could have skipped so your budget would have balanced.

Just for the record, my intent here isn’t that you never get to do anything fun.  It’s just that a lot of the stuff we spend discretionary money on ends up being things we didn’t even really need or want – impulse purchases.  Or we can’t even remember what we bought.  And it’s usually those items that blow the budget.  If we can figure out what they are, we can avoid them.

4.       If your budget balanced, review your spending to see if you’re happy with it.  You might also look for items that in retrospect you didn’t really need.  Add those up and think about other ways you could have spent that money.  If you had $50 that you wasted on stuff you don’t even remember, that’s $50 that could have gone into savings or for something you really did want.

5.       The next month, try to do better and then repeat the review process.

See.  Reverse budgeting.  Analyzing how you spent your money can help you spend better in the future.

Have you ever done reverse budgeting?  Did you think it helped you do better in the future?

 

Plan Ahead with a Budget Allocation Worksheet

Wallet

I’m on a budget.  I don’t have an unlimited amount of money to spend each week so I’ve learned that if I don’t plan ahead, my money gets spent where it shouldn’t and I can’t pay for things I should.

In an effort to plan ahead and set aside money for things I need, I came up with this Budget Allocation Worksheet.  I don’t like it because it keeps me from spending mindlessly (which is how I like to spend) but it’s a necessary evil to keep me out of trouble.

Spending Allocation Worksheet blank

Here’s how I use it:

1.       We’re self-employed so I have our finances set up for a weekly allowance which covers all household spending.  I mean ALL.  It covers groceries, gasoline, entertainment, eating out, vet visits for the pets, doctor visits, repairs, etc.   I make the transfer to the personal account on Saturdays so I have my worksheet filled in with the dates of three months of Saturdays.

2.       Use pencil because you’ll be making changes.

3.       This form is a little tricky to print because it’s horizontal.  So I print it once, put the paper back in, and print another copy on the other end.  You’ll have to experiment with your printer to see how to feed the paper or you can just print one per page.

Spending Allocation Sheet

4.       Record the amounts you expect to have available to spend on household items.  I suggest filling in just one month at a time.

5.       Then start plugging in the amounts you expect to spend on normal things like gasoline, groceries, eating out, etc.  Again, I would only do one month at a time.

6.       Plug in any expenses you have occasionally, like haircuts, specific entertainment expenses (like concert tickets, for example), doctor co-pays, medicine refills, gifts, etc.

7.       Now it gets a little more complicated because we’re dealing with bigger ticket items like repairs, large purchases, bigger gifts, conferences, trips.  I can’t usually just go out and pay for these items – I need to plan ahead.  So I figure out when I need the money to be available and how much I need.  Then I divide it into smaller amounts and work backwards on the chart so I set aside a little bit each week.  For example, let’s say I’m going to a conference in the fall and the fee of $300 is due by the end of June.  I have 5 weeks in June and 4 weeks in May.  That’s about $35 a week.  So I’ll record $35 a week during May and June.  By the end of June, I’ll have the money set aside without busting my budget.

Or I need to pay for a car repair.  The speedometer on my Jeep works sometimes and sometimes it doesn’t.  I know it will cost approximately $250.  So I decide to set aside $20 a week.  I write $20 in each column until I have the money.  Then I schedule the repair.

8.       Add up the expenses and subtract them from the expected income.  If you have a balance, it doesn’t mean it’s extra – it just means it isn’t allocated to a specific item yet.  Things change quickly so before that week arrives you’ll probably have a purpose for that money.  It can also cover overages on items like groceries or gasoline. And there are always unexpected surprises you need money for.  It’s nice to have a little extra for when those come up as they always do.

Spending Allocation Worksheet filled out

And that’s it.  It’s simple and effective.  And it prevents unpleasant surprises that derail the budget.  So print one out and give it a try.  And let me know what you think.

Download a Budget Allocation Worksheet for

 Personal
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13 Tips for Staying on Budget

Money

My personal budget is set up so I have a certain amount of money set aside for bills and the rest is for what I call “household spending”.  Household spending includes groceries, gasoline, makeup, eating out, entertainment, doctor visits, etc.  I don’t have any trouble sticking to the bills budget but the household budget is another matter entirely.  If you struggle with sticking to your household budget, like I do, here are some strategies that might help:

1.       If you don’t have money to spend, it’s probably not a good idea to go shopping.

2.       Keep track of how much you’ve spent and how much you have left.  If you don’t know how much money you have left, you won’t know if you can spend any.  I know, I know – ignorance is bliss, but if you’re trying to stay on budget, you have to keep track!

3.       When you’re out shopping, have a list.  And on that list, have estimates of how much you’re going to spend on each item.  Add it up and be sure it fits the amount you have available.  If it doesn’t, modify your list.  And while you’re shopping, as you mark things off your list and put them in your cart, it might be a good idea to write down how much the item actually costs.  That way, if you have to put something back, it’ll be easier to figure out which item needs to go back.

4.       Shop with cash and leave your cards at home or in your car.  It’s hard for me to spend cash but easy for me to spend the invisible money in my checking account.  And unfortunately, if I go in with cash but spend more than my cash, I’ll just whip out my card and figure it all out later.  So if that’s what it takes, take only cash.  When it comes to cash, you can’t spend it if you don’t have it.

5.       Be realistic.  If you KNOW you’re going to go out to eat on Friday, budget for it.  If you’re not realistic, you’re probably not going to be able to stay on budget.

6.       Don’t buy anything that’s not on your list.  I stay out of a lot of trouble when I do this!  Obviously there are exceptions.  If you’re out shopping and suddenly remember you needed something that isn’t on your list, adjust if you need to and get the item.  This principle of not buying anything that’s not on your list applies primarily to impulse items.

7.       If you mess up, don’t give up.  Analyze what went wrong and do a course correction.

8.       Be accountable to someone about your spending.  You don’t have to give them every detail but perhaps a weekly update on how you’re doing – whether you’re sticking to your plan or not.

9.       Make a game out of it.  See how well you can do and then put the money you don’t spend in a jar for a specific savings goal.

10.     If you have a category you’re really struggling with, you might need to analyze that category, figure out what’s going on and come up with a plan to fix it.

11.     At the end of any shopping trip, but before you check out, take one last look at your cart or basket and see if there’s anything you can put back.

12.     Keep a chart on the refrigerator or some other prominent place showing everything you buy!  Knowing you have to write it down and others might see it could be a motivation.

13.     At the end of each week, analyze your spending.  See how close you were in each category.  Note what you did well and what you messed up.  Note what you could have done different to make it work better.

These strategies help me stay on budget.  What are your strategies?

10 Ways to Save $ at the Grocery Store Without Using Coupons

Groceries are expensive and getting more expensive all the time!  These days there are lots and lots of articles about ways to save money on groceries using coupons.  In fact, there are entire websites devoted to updating you on sales and providing coupons for you to use.

But what if coupons aren’t your style?  If you still want to save money, here are ten ways you can:

  1. Shop the sales.  Most grocery stores provide a weekly flyer that lists all the sales.  If you design your menu around the sales, you can save money on your weekly bill.
  2. Stockpile.  You can also take advantage of the really good sales to buy extras of the sale items you know you’ll use.
  3. Have a couple of meals each week that are really economical, like Lentil Casserole.
  4. Buy your non-food items at a place like Dollar General and only buy food at the grocery store.
  5. Buy fruits and vegetables that are in-season.  Strawberries in the winter cost a fortune, but in the summer, they’re not too bad.
  6. Use off brands whenever possible.  Sometimes the off brands taste just as good as the store brands and sometimes they don’t.  Through trial and error you can figure out when off brands can save you money.
  7. Cook from scratch.  Processed foods often (but not always) cost more than if you cook the same items yourself.  Do some cost comparison and see when homemade can save you money.
  8. Skip a week.  Obviously you’ll have to get milk, eggs, bread, fruits and vegetables, but skip all the rest and use up what’s in your freezer, pantry or stockpile.
  9. Shop from a list.  Make a detailed grocery list, complete with prices.  Add up the prices and make sure you’re on budget.  When you go to the store, don’t buy anything that isn’t on the list.  If you forget something and have to have it, remove something of equal value that you can do without.
  10. Shop with cash.  If you really need to stick to your budget, the best way is to use cash.  When you’re using cash, you can’t spend it if you don’t have it.

If you want to try your hand at saving money with coupons, guest blogger Elizabeth Scholes wrote a series of articles that will walk you through the process.  You can find the Couponing Series in the sidebar.

Budgeting Made Simple

We’ve all read the articles and books about how important a budget or spending plan is.  And those articles and books are absolutely right.  A budget or spending plan is extremely important – especially at this time of year when there are a lot of extra expenses due to holiday travel, big meals, and gift gifting.

So do you have a budget?  Preparing a good, workable budget is hard and sometimes it just doesn’t seem worth it.  So is the solution to forget it and not even try?  No.  If you’re not willing or don’t want to make a budget in the traditional manner, then instead of not having one at all, try this really simple way to do it.

At the end of the month (that’s the ideal time but any time is okay):

  1. Figure out how much income you’ll have for the upcoming month.  Be sure to include any additional amounts you might receive like bonuses, rebates, refunds, gifts, etc.  Place that number at the top of a sheet of paper.
  2. List each bill you’ll have during the month, with the amount.  Add up the total and subtract it from the income amount.
  3. The balance remaining is your automatic budget for the month.  Now take that amount and figure out what expenses need to come out of it.  If your budget is like mine, you’ll probably have to make some modifications to get it to work.  Be sure to include groceries, gasoline, eating out, clothes, gifts, etc.  And if you can, set some money aside from future expenses like Christmas presents or car insurance.

That’s it.  You can do that for a whole month or a week or even two weeks at a time – whatever works for you.  The beauty of this budget is that it’s simple, doable and based on your life!  So if you don’t have a budget, give it a try.