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Budget: Creating/Living With

Step 5. Set Flexible Rules For A Budget That Fits Your Circumstances

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Useful numbers: Use numbers that make sense for your life. For example $10, $100,$1,000 or larger units

Make your budget flexible: Include some extra money in your budget that's not earmarked for anything in particular. This will allow for unexpected expenses and give you some "play" money. Also consider putting in bonus money to spend any way you like -- absolutely guilt free -- during each period in which you meet your budget. It doesn't have to be a lot of money -- just about any amount will do.

Give yourself an allowance: Unless it suits you, trying to keep track of every dollar you spend can be stressful. Consider giving yourself a weekly cash allowance of "pocket-money" to use towards things like bus fare, taxis, lunches, and the like. Calculate the amount of the allowance by putting these items in your budget, then add them up. This way, if, for example, you want to take a taxi one day, you'll be able to without worrying about your budget. However -- depending on how much of your "allowance" is left -- you may then need to bring lunch to work or cut down on something else the next day.

Match timeframes: While people often get paid weekly or bi-weekly, fixed expenses and debt payments are usually on a monthly basis. But, a month is actually more than four weeks. If your expense is monthly and your income is weekly, either divide the expense by 4.33 -- for a monthly budget -- or multiply your income by 4.33 for a weekly budget. For example:

  • If you're doing a weekly budget and your rent is $800 per month, you should budget $185 ($800 divided by 4.33) per week, not $200 ($800 divided by 4).
  • If you get paid every two weeks, do the same thing but use the number 2.17.

Divide expenses between Core, Discretionary and Unnecessary Expenses: (See above.) Only include Core and Discretionary Expenses in your budget.

Put savings first: Regardless of your current financial or health situation, put in a number -- even if it's only a dollar -- for savings, especially if you don't have a fully funded Emergency+Fund. The easiest way to save is to have money automatically deducted from your paycheck. Saving may make your financial life tighter than you would like, but you'll have some money put aside for life's funny tricks "just in case."

Create a weekly or monthly budget of what you can spend.

  • One of the good things about a weekly budget is that no matter what happens, you can start fresh again the next week.
  • On the other hand, a monthly budget is easier for people who receive income and pay bills on a monthly basis.
  • Our chart works whether you are preparing a monthly or a weekly budget.

Include occasional expenses: Try to budget an amount for each item whose cost you can reasonably anticipate. Some expenses are easy to forget about because they may occur less frequently than monthly. For example, if you pay your gym membership once a year, you'll still need to budget for it. Divide the annual amount by twelve and budget that amount per month. Think about things like insurance that are paid quarterly, or veterinary expenses that may only come up twice a year.

Don't include income until you receive it: You might be tempted to include income such as overtime, bonuses, back disability payments, health insurance reimbursements, or other money you are expecting. Don't. If the funds don't come in on time -- or at all -- your budget can get out of whack. Include only your regular weekly or monthly sources of income, such as the income from employment, an approved disability claim that has already started paying you, or rent your receive from a tenant who is bound by a lease.

If you can swing it, consider budgeting as if there are only four weeks in a month. If you get paid weekly, you'll have an "extra" paycheck four times a year that can be used however you need or want to. (If you get paid every two weeks, you'll have two extra checks.)

Round up: Don't try to budget everything to the penny. You may not even want to do it to the dollar, preferring to round things off to the nearest five or ten dollars. If this works for you, fine, just be sure to round UP not down. So if your budget calls for $23.18 per week for the electric bill, budget $24, $25, or $30 -- NOT $20!

Group expenses together: Just as governments do when they study the spending patterns of its citizens, group your expenses together. This will give you a built-in flexibility. For example, instead of budgeting for buses, taxis, trains, and gasoline separately, use one amount for a transportation total. You'll then be able to choose different ways to get around without having to keep track of your budget for each specific type of transportation.

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