How to Start a Budget

I am super excited about this post.  With the Holiday season hemmoraging money seems very common. 

As a somewhat newer married couple (3 years in April) the Hubs and I are still trying to figure out the whole budgeting thing... okay, it is mostly me, but we are learning together. 

One of my main issues when it comes to starting a budget is feeling overwhelmed with where to start.  This is where Danielle comes in!

Danielle Liss is a lawyer in Las Vegas. In April 2008, Danielle hit her financial rock bottom. Due to overwhelming student loan debt, money owed to her grandfather from his assistant when the housing bubble burst (he helped her avoid a short sale) and credit card balances of approximately $37k that she ran up due to compulsive shopping addiction, Danielle was lost and not sure where to start financially. She started working with consumer credit counseling to pay back her credit cards and by December 2010, she will have paid approximately $30,000 back in her unsecured debt. First, she learned how to budget and can happily say that she now lives with an all cash budget. (Although she doesn't use actual cash. She has a well loved American Express Zync card. She doesn't really want to go down the credit card road again.)

Q: How should one begin to budget? It feels really overwhelming - I have no idea where to begin.

To begin budgeting, I highly recommend setting up a spreadsheet. There, list all of the money that you have coming in. This way, you know how much you have to work with. Then, list your fixed expenses for the month, such as your utilities, mortgage/rent, car payment, insurance, etc. Then, add in estimates for your variable expenses. This can get tricky, so you will need to look over the past couple of months and see how much you have spent in these categories. How much do you typically spend on groceries? Eating out? Clothing? Entertainment? Then, look at the expenses that come up only once or twice a year, like holiday spending, vacations, etc. Divide those numbers by 12 and enter them into the budget so that you have an idea of how much goes toward that expense each month. (That way it won't be a surprise expense at when that date hits.)

Once you have all of those numbers entered, is there money left over or is there a negative amount? When I set up my first budget, I was really negative. I had to sit down and figure out where I could cut my expenses. I realized that I was spending ridiculous amounts on eating out and groceries, so those were the two biggest areas that I cut expenses and that helped considerably.

If you aren't a fan of making your own spreadsheets (which is a completely foreign feeling to me - it is listed as one of my interests on Facebook), there are a lot of good forms online. I highly recommend the free resources offered by Dr. Dean Burke on The Millionaire Nurse. Trust me, it doesn't matter if you aren't a nurse, he was my money coach and he whipped me into shape. He has a great budget template that you can start from.

If you use online banking, I highly recommend Mint.com. They offer fantastic budgeting tools. It allows you to sync all of your credit cards, bank accounts and investment accounts. You can create a budget online. Then, if you exceed your budget or you are coming close to the threshold that you've set, you can ask Mint to send you an email or text alert to notify you. It's a great service and one that I personally use.

Q.What is your #1 Money Saving Tip?

For me, as a recovering compulsive spending addict, the biggest thing I have to remember is to evaluate whether or not I actually NEED to purchase an item. Shopping isn't meant to be a hobby or a way to hang out with friends. I no longer shop as a way to pass the time. I no longer shop to make sure I am getting a great bargain.

For most people, I think the key is to keep careful tabs on your food budget. See how much food you waste each week. When I started keeping track, I was ashamed at how much food we were throwing away. We started planning careful menus and made sure that we accounted for leftovers (either for lunches or for another meal later in the week). We spent a lot less when we were wasting less. Also, don't buy what you don't need in the grocery store. It sounds so simple, but it really is true. For a while, I was really into couponing at the grocery store, but then I realized that I was buying things for the bargain and we ended up with so much stuff that we weren't eating. It wasn't stuff that I would typically buy. Now, I don't buy the Sunday paper and I don't coupon at all. I don't buy enough brand name items to make it worth the time or effort.

If you are eating out a lot, you can often make something healthful and tasty at home for a lot less. We stopped going out to dinner. Sure, I still want sushi on a regular basis, but there is absolutely no reason why we need to spend money to go out to eat sushi once a week. It's such a waste of money in the grand scheme of things.

Q. Is it possible to be green on a budget? (I know - not your favorite word)

People ask this question a lot. I personally think that being green has saved me a ton of money. I realize that not everyone is going to run out and buy a hybrid car (which saves me a fortune on gas), and that's not really the point of the green movement. But when you look at the little things, most of the green movement can fundamentally save you money. Reduce, reuse and recycle. Reduce - what can you cut back on? Do you need to use paper towels or can you use rags? When we switched from paper towels to rags, I saved a small fortune. Reuse - by reusing things, you are not buying something new, so you are inherently saving money. And buying recycled goods is not that much more expensive. I get recycled plastic trash bags that are also biodegradable and there isn't a big price difference between those and what you would typically see advertised by Hefty.

Think about how much you spend on the various cleaners in your house. Before I got my ionator, I stopped using all of my chemical cleaners and started making my own. Making a bottle of all purpose cleaner cost about a dollar, instead of $4 to purchase something at the store. If you prefer to buy a branded green cleaner, you can do that, but you can also discover the wonders of baking soda, vinegar, and tea tree oil. It's a whole lot cheaper.

I purchase organic food at Costco and it is much cheaper there than it is at most super markets. Here's another tip - organic meat tastes sooooo much better than meat that is pumped with antibiotics and fillers. I hated chicken until we switched to organic. The flavor is completely different.

And if going green means turning off a light or putting small appliances on a power strip so that it can be turned off when not in use, that's saving you money off of your utilities. You don't have to install a solar panel to go green. There are so many ways to do it. You can walk outside - Free. You can go to the library instead of buying new books - Free.

You control your money and you decide which companies to support as a consumer, so you can make the decision to support only those companies who are environmentally responsible. It's that simple.

Being green isn't about spending tons of money to make crazy improvements to your house so that you can be Ed Begley's newest rival. It's about awareness and doing the things that you can to reduce your carbon footprint. Growing your own veggies or composting your own soil will only save you money. Organic food will improve your health.

There are so many options. I highly recommend that people who are on the cusp of going green, but feel overwhelmed pick up a book to give them some guidance. I really liked Gorgeously Green by Sophie Uliano, because that had a real world approach. She didn't expect me to give up my a/c in the Las Vegas summers. It showed me that there were things that I could do and it gave me tips on how to do them. And how to save money. (And I got it at the local library.)