With your list of expenses in front of you, it’s time to distinguish which are Needs and which are Wants. Just to be clear, Needs are those things that we cannot live without, more or less, and there are three levels.
Level 1: Have these or die. This list is small—food, water, shelter, clothing, potty.
Level 2: Have these or suffer (and possibly die later): Soap and water, toothbrush, toothpaste, and other hygienic needs, and dental / doctor visits.
Before making out your first budget, you will need to figure out where your money comes from (income) and where it goes (expenses). Start with a blank sheet of paper and draw a line down the middle. Above the left column, write Income. Above the right column, write Expenses.
Now comes the fun. From memory only, start listing income (both the sources and amounts). Do you know exactly how much you make? Do you know all the sources of income? Do you have income that isn’t very obvious? Does your income fluctuate? Be as complete as possible.
Author’s note: The more We (the evolving consumers) learn to recognize what They (the salespeople) are trying to do, the less likely we are to open our pocketbook without thinking. This is the first in a series of posts exploring the sales practices we have all fallen victim to.
Call it a war or call it a game. It’s Us against Them, as buyers and sellers duke it out in the consumer arena.
The people selling goods and services have one mission: Get the money. And while some salespeople are honest and some are not, it won’t be stamped in big red letters on their forehead. So at the very least, we need to be cautious. If it helps, remember that another word for a salesperson who can’t make a sale is unemployed.
Now that you have all your supplies gathered, it’s time to start getting organized.
The first thing is to set up a filing system. Each file folder will contain some paperwork that matches one part of your life. Since we’re all leading different lives, I can’t tell you exactly which labels will go on your folders. Students will need to keep track of things like receipts for tuition and books, and might not have car or rent expenses. A full-time worker will likely need to keep track of a lot more things including rent and utility bills.
The answer may surprise you.
For many people, sadly enough, the word budget has several horrible and complicated meanings. To take the fear and mystery right out of it, let’s look at what a budget is and is not.
What it isn’t: A budget is not something you need a computer to do. A budget is not a device to take all the fun out of life. Nor is it a hard-and-fast set of rules to follow no matter what.
A long time ago I learned a concept that was so simple, at first I didn’t understand how it could be so powerful. Now, after seeing this principle work for many years, I want to share it with you. Just remember that no matter who you are or what your life circumstances, it will work.
Here it is, in 11 words that will change your life:
If you’re going to take this business of managing the finances seriously, you’ll need a few tools. I know you’ll have some of them already but for the others, please go out and get them. This is the only time you will be asked to spend money and I promise it’s worth it. In fact, this is a great beginning exercise in investing in yourself. This small sum you spend now will pay huge dividends for a long time.
Here they are (Walmart prices in parentheses):
• Letter-size manila file folders. These are the standard folders, measuring about 11.75 inches long by about 9 inches high, excluding the tab. Buy the biggest box you can afford, up to 100 folders. You won’t want to skimp on organization someday just because you’re running low on folders. If you feel like splurging, get the colored ones for finding things easier. File folders are a must. ($3.50 for 50)
One of my earliest memories was seeing my dad in the evening, reading glasses on, pencil in hand, surrounded by a legal pad and some papers. I remember asking what he was doing. “Just figuring,” he would always say. I was too young then to know what the word meant, let alone understand how the numbers on the big yellow pad made sure his family would always live with dignity.
It was his regular figuring that would keep our family secure in spite of having just one income, and a limited one at that. The four of us lived in a two-bedroom, one-bathroom post-war house in Long Beach, California. That’s right, I shared a bedroom with my sister. If that sounds tight, you should have been around in the morning when everybody jockeyed for the bathroom. We had a used Chervrolet, plus a car provided by the City of Long Beach to be used by its employees for work only. Yes, my dad was a blue collar worker for the city. Mom was every bit the mom, staying home with the kids and doing it all while her husband made a living.
