YOU CAN’T BUILD A BUDGET WITHOUT BLUEPRINTS

 

Budget preparation is an essential action step that if you pretend you don’t need you’ll never get past GO with your finances! Creating a personal budget doesn’t have to be complicated however the fine details certainly help to assess where existing or potential problems may sneak up. 

Using a financial spreadsheet to document everything to do with money coming in and going out of your life is in my opinion an essential tool for everyone, even if you think you don’t need it. You do!

Every month before you sit down to figure out your finances there are budget preparation steps that you don’t want to miss. The reason for this is because if you put half the effort into your monthly budget you’ll only get partial or potentially inaccurate results.

Like you, budgeting was new for us years ago and took time for us to get to familiar with but over time we can safely say we are in a place where we confidently collect the monthly data we need. If you are one of those people who think you can search the web for a free budget template and think that’s all it takes to get your finances on track, your walking into your debt with blinders on.

Take off those rose coloured glasses and have a serious look at what’s happening in your financial house. Budget preparation is one of the main reasons people fail at budgeting because they see it as “extra work” and people don’t want that. Let’s get real for a second. Nothing in life comes without a bit of elbow grease so find the time to get the dirty work done right.

Think of budget preparation as the blueprints for your house. A budget is NOT turn-key which means you need to work at it. I’m tired of reading about how simple it is to budget and all you need to do is throw some numbers together. Huge mistake.

If you try to build your house without a visual plan in place you’d struggle. You may get the house built and looking pretty but the walls are not secure. Your house can tumble at any time because you didn’t use the right tools to get the job done. Budget preparation means working from the outside in so you cover all of your bases.

Related: How NOT to become House Poor

 

Write these Budget Preparation Steps Down Now!

 

Before computers were a big thing many of us crazy people used something called a pen and paper. It was easier to write stuff down because it was burnt in my head as opposed to just reading how something was supposed to be done.

I like math for example, but I don’t LOVE it. I can’t just look at a complicated math question and figure it all out in my head. If I could I’d likely be doing something far different in life than what I’m doing now.

My point is when you use examples and practice, things get easier. So often we rely on computers to get the job done and it’s taking away from the hands-on approach. Computers are hands-on as well but I don’t find it to be the same as “doing”.

If you’re just starting out with budgeting these 3 budget preparation steps will help lessen the stress that comes with budgeting and help you employ the easiest route to being successful with your budget.

 

Where is all your money going?

 

If you don’t know where every penny you earn is going then you need to start tracking it now. Don’t wait until next month, next year-start now! It’s critical to know your numbers which means document everything even if you have to write it all out. I find this easier but it’s up to you.

Make sure you know how much money you gross (earn), net (take home), debts and other monthly bills that need to be paid. You want to know how much interest you are paying and what the total amount you owe is. All these little details are critical because if you don’t know them they will get to know you and fast. Don’t let your money take over your life.

 

Prepare a budget binder

 

You will want somewhere to keep all of your documented information and the receipts that you will be collecting when you spend money. I’m not laughing because we’re debt free and you know what, we still do it. I am proud to say that I am not shy or embarrassed to ask or collect receipts. I take the time to invest in our present and future financial interests. Aren’t you or your family worth this step?

You can keep all the important information that you need in your budget binder such as a printable budget sheet, your debts, phone numbers, financial documents etc. Your binder is your financial bible. Don’t let anyone mess with it and keep it private where no one can read through it at their leisure. It’s your personal business that no one needs to know about.

Related: Get our free printable budget or free excel budget spreadsheet

 

Set up a Budgeting Station

 

You don’t want to be doing your budget in front of the television sitting on the couch. You don’t want to do you budgeting laying on the bed or sitting on the toilet. I know that sounds funny but where you choose to focus on your finances can really make a difference to your overall net worth.

If the kitchen table is your only option try to find a small table, desk or cabinet to sit in a corner where you keep all of your budgeting materials. Once you are ready to do your budget you can pull out what you need.

Make sure your space is well lit so you aren’t falling asleep next to a dim light trying to run some of the most important numbers of your life. We already know how boring that can be unless your a numbers nerd like my wife.

Keeping your budget workstation clean and clutter free will help keep your mind the same. Less is better which means getting rid of distractions that will take your mind away from your budget. If you have kids or other priorities that you must take care of do this first until you have quiet time to focus on your budget.

You’ll get more done and likely make less errors.

When you want to do it right, do it right from the start especially if you find your debt getting ahead of your finances. The last thing you want to do a sloppy job budgeting your money because you are being too lazy or come up with a million excuses why you can’t get it done.

See #10 Below!!

Photo Credit: Bud Redding/Facebook

 

Where our money went in April

 

An exceptional month in terms of Income, however I did not earn all this in one go. There is quite a hefty Income Tax return cheque from the government in there. It’s still money I earned over the course of last year that got paid back to me, so it’s still counted as income.

Some people will take an income tax return and blow the money on something like a hot tub or something similar. Not me. All of the money and more on top will be going towards my RRSP to take advantage for next years tax return and pretty much take me to the point of fully caught up.

Is it worth saving for a rainy day? Sure it is, why would you risk losing everything for the sake of not saving for the future? A day will come when I’m no longer able to work or able to maintain the house or the car myself so paying out more money will eventually hit us.

Taking out a loan for a new roof when I’m 65 and then paying it back from pension payments is something I’m not prepared to do. If we look after our finances now, they should look after us when we really need them.

Do you know where your money goes every month?

 

Pick a budget that’s right for you

 

I’m currently offering 2 versions of our budget and the reason behind it is simple. Firstly, read the CBB blog disclaimer because what you do with it is your own business so if you mess it up you need to sort that out.

I have not closed off any cells so you can make all the changes you like to the budget to reflect your lifestyle which is what you asked me for in your emails. (See I do listen and read your comments and emails)

Although I would love to help every single fan with their budget I am unable to do so but I am always willing to answer any emails you send me so don’t be shy.

This was after all meant to be our personal budget and although I would love to customize it for every fan that wants to use it but, I’m afraid I cannot.

I’m not selling this budget or hope to make any money from it so enjoy this free budget and I hope that it works for you as much as it does for us.

 

Our free budget spreadsheet

 

You can download the free budget spreadsheets here.

• Budget 1– You can use the pre-existing categories or you can use your own if you wish and you have the option to use projected expenses or not. Please read all notes left around the budget for tips.
• Budget 2– Everything is pre-set so you have to use the pre-defined categories but this budget will generate year-end budget figures where the other one won’t but you must use the categories already in this budget. If you change anything you will mess up the formulas and year-end figures.
• Please read all notes left around the budget for tips.

Test the budget for a month and see how it goes.

 

Our family budget plan

 

How we budget our monthly expenses?

I often have fans ask me how to budget money on a low-income or they simply have a high debt load and want to kill it like my friend Tony who got rid of over $100,000 worth of debt by using a budget.

CBB fans want to know what we do in order to save so much money and the reply I give is simple>> It’s not about the money it’s about the process involved.

We are both money managers of our finances and with our relationship compatibility we have been able to get to where we are in 2016, debt free.

It doesn’t matter if you are using a cash only budget or you use your debit and credit cards, if your budget doesn’t balance you have budget issues you should check it pronto.

Learning how to be your own money manager is important because no one else will care about your money more than YOU!.

We don’t always save as much money as we would like every month but most importantly we are not going into debt but only because we are budgeting our money. In fact we are currently debt-free including the mortgage which means all we pay for is our monthly bills and expenses.

One of the most important things we did for our personal finances was that we never let the budget deter us from reaching our goals.

Sure we’ve had crap months but we’ve made up for it or we learned from our mistakes just like we should. Budget failure only occurs when you give up on your budget which should not happen as long as you truly want to reach your goals.

We didn’t always earn the income we do today but made do with what we were earning so we didn’t go into debt. That my friends is called “living below your means”. The only science to becoming rich!

Sometimes fans email and ask me if living on a budget in Canada is any different from living and budgeting in other countries. To be honest I’m going to say, probably not.

If I still lived in the UK I could use this exact budget spreadsheet to meet all of my needs however the budget needs to be reviewed monthly.

Below are links to the budgeting series which I wrote while designing our excel budget spreadsheet which will give you an idea just how we designed our budget.

I’m not a financial planner/advisor so I can’t tell you how you should budget but I can show you how we budget. I’m just a regular guy just like everyone else; some might call me a budget or numbers nerd.

 

Learn how to budget with Mr.CBB

 

Our Budgeting Series

Do you want to learn to budget like we do?

We explain everything we do and more in this mini-series below all about budgeting.

Please take the time to read through our budgeting series plus read Budgeting in the New Year. I hope the information will help stop you from making common budgeting mistakes that I hear of often and that you take something away from the information and apply it to your financial situation.

If you have any questions about what we do with our budget money tracker feel free to email me.

1. How We Designed Our Budget Step 1– Gathering All the information
2. How We Designed Our Budget Step 2– Budget Categories
3. How We Designed Our Budget Step 3– Tracking Receipts
4. How We Designed Our Budget Step 4- Note-taking
5. How We Designed Our Budget Step 5– 5S Organization
6. How We Designed Our Budget Step 6– Who Does What and When?
7. How We Designed Our Budget Step 7– Balancing Our Budget
8. How We Designed Our Budget Step 8– Knowing our Coupon Savings
9. How We Designed Our Budget Step 9– Reading Our Bills
10. How We Designed Our Budget Step 10– Projected Expenses

 

Budget percentages April 2016

 

Our savings of 64.47% includes savings and investments and emergency savings for this month. If you include the projected expenses savings, we actually saved 76.59% of our income. That’s $12119.91 going into savings or investments of some description or another.

The monthly totals comes to 100% which shows that we spent our income this month and used the rest as emergency savings.

The other categories were well within the defined percentage limits. Our projected expenses this month is at 12.12%.

 

Budget percentages month by month

 

 

Breaking down expenses

 

This is simply a breakdown of our expenses which has helped us to understand where all of our money goes. Since May 2014 we have been mortgage free so much of our money will be directed at savings, investments and renovations.

I appreciate that you enjoy this budget update each month but I do hope you view this as an educational tool rather than comparing your own financial numbers as our situations are all unique.

Although I encourage your comments and love to hear what you have to say about our budget categories and expenses please don’t tell us to donate our money to charities because we have too much or are fortunate. We are hardly out of the clear with finances for the rest of our lives and have worked and sacrificed to get where we are. We do plan to enjoy the money we’ve saved now since we haven’t over the years with our son.

What we do with our “extra cash” is our business and although we do donate to a charity we won’t be putting it on display for the world to see as it defeats the purpose in my eyes. It is part of the budget as you see it. I hope that clears that up for those of you who had concerns about our extra money.

Almost 8 years ago I started working in Canada making a bit over minimum wage and have since moved up the ladder. I’m now working very hard to secure my dream job with one foot in the door. We aren’t all lucky but if you do the best you can at least you can look back and say you gave it a shot.

Sometimes we wish we had more money to budget with but understand that we only have what we earn and if we want more, we need to earn more. Spending less than we earn and budgeting our money has been the easiest way for us to pay down debt and save money.

1. Chequing– This is the bank account where all of our debt gets paid from.
2. Emergency Savings Account– This is a high-interest savings account.
3. Regular Savings Account– This is a savings account that holds our projected expenses.
4. Monthly Budgeted Total: $5093.64
5. Monthly Net Income Total: $15824.41
6. (Check out our Ultimate Grocery Guide to see where our grocery money goes)
7. Projected Expenses: These are expenses we know we will pay for throughout the year = $1917.68
8. Total Expenses Actually Paid Out: $5058.09
9. Total Expenses Actually Paid Out: Calculated is $15824.41 (total net monthly income) – $1,917.68 (projected expenses) – $8848.64 (emergency savings) = $5058.09
10. Actual Cash Savings going into Emergency Savings: Calculated is $15824.41 (total monthly net income) – $5058.09 (actual expenses paid out for the month) – $1917.68 (projected expenses) = $8848.64

 

Saving for stuff you haven’t yet paid for but need to!

 

What are Projected Expenses? – We project expenses throughout the year so we have the money saved. PE= A projected expense is money automatically saved each month so it is ready when the bill comes in or when you need it as in the example below.

We review our projected expenses at the beginning of the year to set up our yearly budget and adjust as we go along if a new projected expense arises and needs to be added to the budget. Sometimes we remove a projected expense as well so it’s very important to keep an eye on your expenses.

This has happened on many occasions but it’s bound to happen as we can’t predict everything we have to pay for over the course of the year. The important part for us is that we are saving for these expenses and we no longer have to stress about taking money from our savings to pay for them. To learn more about projected expenses read Step 10 in my budgeting series.

When we spend the money in a projected expense category we move that money to our chequing account in order to pay for that incoming expense. So this means the numbers go up and down in the projected expenses account based on what we need to pay for that we saved for in the account over time.

The only thing you need to do is track your projected expenses each month manually as I can’t customize that for you in the excel budget spreadsheet as I don’t know what you will use for projected expenses.

For now we will have to manually track which means month after month we add up what we save in each projected expense category and minus what we spend so we know how much we have and what is left in each category. I have updated our personal excel budget spreadsheet for 2016.

We pay money into the projected expenses account continually throughout the year even when bills come due as its revolving so as one bill gets paid the money continues to come in from the other categories all year-long. This ensures that money is always available. It may not always be enough but having something ready is better than having nothing at all and having to use credit.

So the $1917.68 gets paid into the projected expense account every month no matter what. It seems to be easier to track our money this way but you can do what works best for you.

Sample Projected Expense

If our clothing category was a projected expense we would have a budget of $50 per month for the two of us. If we spend $30 on clothes for the month that means we need to pull $30 from the projected expenses account to pay for this expense or we move only $20 to projected expenses for the month and leave the $30 in your chequing account.

It’s up to you how you do it as I mentioned above. My plan is to create a projected expenses spreadsheet to track the expenses all year-long otherwise you need to do it manually which we currently do in order to make sure we don’t overspend what we haven’t saved or will save over the course of the year.

It’s a fairly easy process and becomes a lifestyle change for your finances but the most important part is that the money is available and saved, which means potentially less stress.

This means we should have $600.00 per year for clothing to spend. We have to track that expense as we spend it manually but hopefully for our 2015 budget I can incorporate that into our spreadsheet so it tallies the numbers up as we go along. That way we will be able to know exactly what we’ve spent as an ongoing total.

(Note: I am working on this but slowly as I wasn’t anticipating all the extra hours with my second job)

 

Budget Results

 

Time for the juicy category numbers and to see how we made out with our monthly budget. Below you will see two tables, one is our monthly budget and the other is our actual budget for the month of April 2016. This budget represents 2 adults and a toddler plus our investments.

If it is highlighted in blue that means it is a projected expense. You will also see our budget does not include the emergency savings as this is factored in at the end.

 

Budget for April 2016

 

 

Actual budget expenses for April 2016

 

 

May 2016 Goals

 

Here are my May 2016 goals along with whether I completed tasks from April 2016.

• Find a used dresser for our sons clothes on the main level of the house- Fail
  
• Call around to lawyers to talk about getting a Will written up- Pass but will wait to set up appointment once I have a couple of months off from my second job.
  
• Finish sanding and stain our sons kitchen table and chairs – Fail
  
• Start revamping old blog posts (2 a month)- Pass
  
• Finish the master bathroom shower- Fail but it will get done this summer
  
• Pick out new tiles for bathroom and accessories (mirror, towel bar holder etc.)- Not yet
  
• Buy a new blind for the garage- Fail but we’re looking mostly at second-hand shops. We’d rather not buy a new one if we don’t have to since it’s just going to get mucky.
  
• Finish the walls in the baby room- We will likely take down what we put up for our son and change it to a toddler room with cars. Currently it’s a jungle and he’s never slept in a crib yet. What a waste of time that was!
  
• Write down what we want in our new kitchen- We talked about wall ovens and counters other than granite.
  
• Start looking at pricing for a new insulated garage door- Fail
  
• Buy a pressure washer- Fail but I’m looking and waiting for the one I want to go on sale.
  
• Sort through our sons clothes and sell some- We sold $0 worth in April  but we did give away lots of free stuff to other parents.
  
• Research Kitchen designers in our area-
  
• Start researching vacation spots for 2016- We are talking about going to the Canary Islands or possibly Paris, Spain and Italy after visiting the UK.
  
• Hang paintings and wrought iron decor on the walls- Fail but the wife has hinted at it.
  
• Swap over winter tires and get a vehicle shampoo and cleaning- I did the tires this week but have not had the inside of the vehicle cleaned yet.
  
• Put screens back in the windows and clean them- Pass
  
• Take out all of the patio/deck and sunroom furniture- Fail
  
• Start thinking about planting our basil seedlings- Fail
  
• Sand and protect the deck for the year-
• Start planning a sand pit for our son out back-
• Possibly making a rock pit for our son out back-
• Purge our clothes little by little and get rid of them-
• Clean out the entire garage-
• Get the hanging baskets ready to go-
• Hang the outside iron decor-
• Buy mulch and tidy up the front and back gardens- *the grass looks amazing so far)
• Wash the windows inside and out around the entire house-

 

Budget updates month by month

 

In case you missed our budget updates and want to do a quick search I’ve compiled them all on one handy page: monthly budgets. For the 2016 Year I will also keep track of each month below and update the monthly budgets page.

• December 2015
• January 2016
• February 2016
• March 2016

That’s all for this month check back at the beginning of May 2016 to see how we made out with our April 2016 budget.

Happy Budgeting CBB’ers!

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