Budget 101

A version of this article was first published on Military Spouse Advocacy Network. I am honored to be working with them. 

Google the word “budget” and you will get page after page results. Every finance blogger/author/guru has an opinion on the best way.  I say the best way to budget is the one you will stick with doing.

In its plain vanilla form, a budget is a spending plan for your money. It is how, when, and where you tell your money what to do.  In the beginning, a budget can be painful.  It hurts sometimes to see those numbers flow in and out. But you cannot begin to master what you do not measure.  

We all have needs and wants.  This is the essence of a budget.  We also have fixed expenses and variable expenses.  There are ways to address each one and get as much out of our dollars as we can.  

I like a budget that starts with take home pay.  The reason I prefer this is because many people don’t really know or understand what their before tax pay is, and it can be tedious to remember to deduct all the portions of tax that are deducted before your pay hits your bank account. Now, if you find yourself at tax time with a bill, then that is another issue that should be addressed. Two quick ways to settle that is to either by have more withholdings or make estimated payments. The IRS and Bankrate both have withholdings calculators on their websites if you find yourself in that situation.

Basic Budgets

This includes your income, regular bills, regular variable bills like groceries, and anticipated items such as savings, additional debt payments, and planned expenses.  They can be fancy excel spreadsheets or a handwritten list or something in between.  

Examples of needs are housing, transportation, insurance, groceries.  That is not to say that these amounts must be extravagant, but they are typically the basic requirements for everyday life – a place to stay, a way to get to work, and food.

Standard wants include entertainment, cable, personal indulgences like manicures or massages, and Starbucks.  An argument can be made that any one of these wants is actually a need.  Depending on your lifestyle, health, job situation, and personal priorities I would be inclined to agree with you.  The real challenge is personal finance is personal and not one size fits all.

The key to making budgets work is communication between spouses and age-appropriate conversations with children.  In our budget, in my house, we have decided that it is important for each spouse to have their own bit of money to do what they please. It could be $10 or $100, or some other number that is agreed upon, but each adult should have the ability to have some bit of cash to spend and for which they do not need to answer to anyone else.

Do you have a budget?  Do the adults in your home have allowances or agreed free spending money?  How do you balance needs and wants?



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