How to Budget Your Money

By: Mark Stevenson

How to Budget Your Money

Does your budget never seem to balance the way it should?
Are you constantly digging into the savings to make ends meet? If you find that your budget isn't doing the job, then it's time to take a good look at essential components you might be missing or you have not allowed sufficiently for. 

A. How to Budget Your Money #1
Plan for Variable Expenses

1. Budget for Irregular Expenses
We all have irregular expenses that we naively refer to as 'unexpected.' You need to be more aware and budget for these unexpected events.

  • Your car breaking down 
    - The flat tire is unexpected
    - Car repairs or maintenance?
  • Your household applinaces
    Budget for the repairs or even worst replacements of hot water heater, washer, dryer, or some other major appliance doesn't
  • Home maintenance is always a factor in our finances. Even if you rent, you probably have some home related expenses waiting to creep up on you.

These are just a couple examples of variable expenses that we often overlook. When you consider the following other categories that could be included in this list, you can see the serious consequences this oversight can have on your budget.

2) Add Insurance into your budget
Property, Auto, Health and Life Insurance if not paid on a monthly schedule will cause more problems.

Even if you do pay monthly, you should try to save for a lump payment if at all possible. Most companies charge up to a $3 fee for monthly payment options. It doesn't sound like a lot but, over a years time it's $36 you won't be investing in their cause. I say, it's always best to invest in yourself. Don't you agree? Put the $36 in your savings!

3) Budget for Your Taxes
Budget for your Property, Federal, and State taxes. If you know you will have to pay Uncle Sam, prepare for it. If you value your home or other property investment, prepare for the costs. Don't scramble at the last minute to come up with enough to pay your obligations. It's likely other areas of your budget will suffer greatly, since these expenses have a high priority.

4) Budget for Clothing
I can wear a piece of clothing 'til you can see through the threads. I work at home, so I only have a few choice pieces for special occasions. I'm a no frills kind of gal. But, I have four kids. Do I expect them to stop growing or somehow not care how they look to their peers? Of course not! I know that they will need more clothes, more shoes, more accessories.

I use every resource available to me to cut down the clothing budget, I know I must account for this expense. It will arise, whether I am prepared or not!

5) School Supplies
This is another one you just can't omit if you have kids. You can, however, use some clever money saving techniques and multiple resources to keep this expense to a minimum. This includes buying second hand books and buying bulk stationeries for the entire year.

6) Pet Care
If dont have a pet, congratulations! You will save a considerable amount of money. If you have a pet, congratulations! You are taking care of another creation. Being a pet lover, you will find money to make your budget work. Whatever you do, you need to understand that having a pet is an emotional thing and emotions can balloon your budget.

  • You need will to budget for pet food, pet home, visit to the vet, unexpected illness, vaccinations and flea control. These are just a few that come to mind. Again, minimize the costs by using all your resources. If possible, avoid the pet. 

7) Budget for Gifts
I'm guessing most of you are including this one. It's inevitable. My best advice is to set strict limits and be a smart shopper. Seek out the bargains and buy when it's a deal, even if it's months ahead of time.

8) Budget for Medical
Unless you're lucky enough, or not lucky (depending on how you look at it), to qualify for medical assistance, you undoubtedly have medical expenses over and above the cost of your health insurance; Co-pays for doctors and medicines, over-the-counter medications, dental and eye care expenses. Nope, can't omit it, have to include it. Sorry, it's a must have! Buy a hospital insurance plan to cover yourself should you be hospitalised. 

9) Budget for Vacation
If you have the income, include this one to make planning less stressful. Get inventive if you don't have enough income. You can still have a vacation with limited, or no, travel expenses. 

B. How to Budget Your Money #2
Create An Emergency Fund


An emergency is this case should be limited to an unexpected occurrence. A real emergency might include; loss of income, severe illness, or death in the family, hospitalisation. 

Although we all hope such occurrences never happen to us, sometimes we aren't lucky enough to escape these unfortunate events in life. You should try to set aside a specific amount, no matter how little, each month in an emergency fund to eventually equal at least three to six months of your current income. Taking up an insurance plan can minimise some of the unforseen emergency costs. 

C. How to Budget Your Money  #3
Living Above Your Means

This is simply spending more than you earn. Unfortunately, this is a direct consequence of budget blunders A and B. When funds are not set aside for variable expenses and emergencies, you will inevitably turn to plastic money (credit cards) to bail out. Spending more than you earn is a sure sign that you're headed for trouble. When you spend future earnings it's like 'counting your chickens before the eggs hatch.' The long term consequences are usually devastating. It's likely you'll end up in deep debt and eventually have no where to turn except counseling or bankruptcy. Don't let it get that far. Take control of your money. Now!

How to Budget Your Money 
Once you have identified your costs, add up all your variable expenses and divide by twelve to come up with a monthly amount that you should be setting aside for this expense. Keep these funds separate from your monthly bill fund to avoid dipping into it accidentally.

  • Start with 5-10% of your income to start a savings, or apply to an existing savings, each month for your emergency fund.
  • Make sure your expenses are within your income. If not, start reviewing, eliminating, and reducing those expenses to fit into your income limits.

A good budget is like a good friend. It helps keep you strong and steady.

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