To budget or not to budget? No, really, do a budget

Week 2 in Financially Overwhelmed? series

You will see several approaches to putting together a budget in blogs, books and television shows. While there are very valuable reasons to track your expenses to show your spending trends; or to assign categories to your spending; for now, we’re going to work on putting together some numbers that are reflective of your necessary expenses. This is, essentially, a basic budget to give you an appreciation for what you have coming in and going out every month.

This is a “you need to crawl before you walk” step towards reclaiming your finances. I’ve noticed that a few books I’ve been reading seem to leap right into collecting three to six months’ worth of financial expenses before proceeding with anything else. Gail Vaz-Oxlade’s Debt-Free Forever mentions collecting six months of expenses on page 2 of Chapter One to track spending trends. I believe this is absolutely a necessary step towards getting the bigger picture for your money habits but for someone just trying to wrap their head around what’s happening in their financial life, this could be quite overwhelming. I know it was for me.

So here we go:

Below is a sample budget that I had for myself a few years ago. Take note of the headings included in the budget, this is a basic budget designed to help you figure out how much it’s costing you to live every month. Necessary expenses like mortgage/rent payments; car payment; insurance (auto, property etc.); monthly bus pass; and/or minimum credit card/loan/line of credit payments.

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Important points to remember:

–          Be honest – don’t hide from your financial situation by rounding down or guessing at different payments or totals. This isn’t what you want to be, this is what it is.

–          Be thorough – do take the time to pick up the phone and call your lender or go through the paperwork to get the information you need to feed into your budget.

–          Be timely – pick a time when you have a few hours, an open area to work with, and a glass of wine, or a cup of coffee. Pick a time, also, when you are feeling clear-minded and open to the information.

–          Be courageous – it takes courage to face something that you know is going to be difficult. Kudos!

Once you’ve gone through all your information, you will have a much better appreciation of what you’re current incoming/outgoing financials look like. Next week (Thursday), we’ll talk about what to do with your new found information.

Now readers, have you ever had to “be honest” with yourself about something you really didn’t want too?

Here is a sample budget sheet that you may want to check out (this is a downloadable excel spreadsheet from moneymentors.ca.

*Money Mentors is a nonprofit credit counselling agency. You don’t need to need credit counselling to take advantage of their Learning Centre however.