I’ll warn you that this part of setting up a budget can be the most frustrating. When you begin this process you will need to make sure that you’re at your best for the day. Whether you do this by yourself or with your spouse, you will want to make sure there are no distractions or interruptions.

Task #3 Now that you know where you’ve been spending your money and have decided where you want to spend your money, it’s time to cash-flow your budget. (For those of you that are tech savvy [and even for those that aren’t] I have created a very simple Excel Budget Spreadsheet that you can use as a tool in your budgeting process.)

Each of the budget categories that you created last week needs a number. When deciding how much to put in each category, the best place to start is to look back at where you’ve been spending your money. If you’ve been spending $100 a week in groceries then put $100 in the grocery category. If you’ve been spending $50 a week in fuel for your vehicle then put $50 in the fuel category. I think you get the picture.

Here are a few tips for you:

Mortgage: Since there are 52 weeks in the year take your mortgage payment and multiply it by 12 (monthly payment). Take this total and divide it by 52. This is the amount you will need in your mortgage category.

$800 monthly payment
$800 x 12 months = $9,600 per year
$9,600 / 52 weeks = $184.61 a week

Insurance and Car Tags: When you renewed your policy or your tags will depend on how much goes into these categories. If you renewed these six months ago you will need to plan accordingly. If the payment was $500 you will need to divide $500 by 26 weeks (six months), etc.

Paychecks: If you work on commission or your checks vary you will want to base your budget on the lowest amount your check will ever be.

Once you’ve placed a number in each category total all of them up. Your overall total needs to match the amount of your paycheck. If you’re like most people you will have to adjust your categories down to match your paycheck, or you may not be able to have certain categories until you pay off your debt.

It is easy to get frustrated so if you need to take a small break and come back, please do. If you get stuck and have questions, please don’t hesitate to let me know. One thing to keep in mind as you work through this process is that you probably haven’t been saving for most of these categories. So, when Christmas rolls around, you will have money for presents and won’t have to wonder where the money is going to come from, etc.

Once you’ve finished this portion of setting up your budget you’re home free!!! This is, by far, the hardest step.

Other Posts in this Series

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