Budgets

You know, I do realize how lame my blog gets when I post this kind of crap. Buuut, I started this over a year ago, and it has been an absolute lifesaver for both Alex and me. Nick also picked up this method, and he says he loves it, so here you go:

How I budget:

It's a pretty simple method, especially for all of us reasonably tech savvy 20-somethings. We're masters of the PC!, wizards of MS Orifice!, and most of us look like a one-armed monkey dry humping a football when it comes to budgeting and finance. Budgets should be the very first thing on everyone's list when they get out of college (or even before). Here's how I do it:

First, I take every paycheck and enter it into excel, with the name (paycheck), date, amount (after taxes, 401k, health, etc.) for the entire year. I highlight that whole thing yellow.

Then I line up every monthly bill, and do the exact same. Rent, car insurance, gas, food, cable, student loans, the works. Anything that I have to pay every month. For credit cards, I put the minimum balance down and the due date. Anything that takes a day or two to clear, I put the absolute last day I could pay it without late fees. Do it for every month for the whole year (not in order, but in groups according to what the bill is). That way you can be sure you have every payment in for the whole year. You can also highlight different bills with different colors if you want.

Then select the whole thing and sort by date, then by dollar amount. This will put them in chronological order, with your paychecks as the first thing in the day. Add a blank line above each yellow line, and in an unused column take your paycheck amount and subtract each item between that paycheck and the next one. Bingo: you've got how much is leftover for each week! When Friday rolls around take a look at the budget and pay everything under that week. Use a column to check off that it has been paid. Then even though you've got $1000 in your bank account, you know you've only got $75 for "sodapops" that night.

Sometimes, sadly, it comes up negative, but that's what the budget is for. Have $400 this week but -$200 next? Just move that $230 truck payment up a week. You can move things up the list, just don't move them down. You don't want to pay the credit bill when you've got extra cash a week after the due date. A tip for that: if you've got extra cash, put some into savings (I use and highly recommend ING Direct). If you've got a slim week, you can just pull from savings and add that to your paycheck. Because you've done the budget, you'll be able to do it soon enough to have the money clear by the due date. Also, any big ticket items (concert tickets, car repairs) can be easily planned in advance so you'll have the cash available.

Here's what mine looks like:

UPDATE: (3/25/10) I just came across an interesting method at nodebtplan. Check it out, see if it's right for you. Nodebtplan has some good stuff, be sure to browse around a while.

I took nodebtplan's excel budget and executed my method on it, step-by-step in the tabs. Check it out here.