Budgeting 101 - What is a Budget?

Even if you have a very large income, budgeting is still important. If you have no budget you have no way of telling how much you spend on what. The easiest way to explain a budget to those who may not understand the concept, is to show you what a budget includes. It is basically a list of items and then you budget an amount for each for the month. I recommend Dave Ramsey's "Total Money Makeover" plan for getting out of debt - we followed it and it worked for us! You can buy the book online or at a bookstore or even Wal-Mart carries it.

1. Tithe & Offerings
We tithe on our GROSS income (income before taxes are taken out) and ALL increase in our life - whether it is gifts from others or winning something, we give God His tithe. If you don't tithe then don't bother reading my financial posts because they won't apply to you. 10% of all your increase belongs to the Lord and you should also give in offerings because God blesses givers and those that obey His Word.

So, tithe and offerings are the first things we budget for.

2. Housing
You have to have a place to live, whether you own, pay the bank or rent from someone - you have a certain amount you pay for your housing. I did a post on my frugal/financial blog about reasonable rent and you can read that here. Dave Ramsey recommends you only pay 25-35% of your net income for housing.  Make sure you aren't living above your means.

3. Housing "Needed" Expenses
Living in a home comes with expenses and if you rent, your landlord may not cover all your utilities so you need to budget for these. These are things such as electricity or gas, water, sewer and garbage. Our sewer is included in our rent but we must pay the rest. For electricity, we practice a lot of money-saving tips and you can read a post on that here. Water is based on usage, so you can practice conserving water to lower your bill. Garbage is usually a set price and you can't really change it, just don't accumulate too much garbage to where you have to pay extra. You can recycle paper, cardboard, cans, bottles, etc. and some garbage companies give you a discount off your bill depending on how much is in your recycle container.

If you own a home, you will have needed repairs and maintenance. That is why you should never buy a home until you know you have money, not only for the mortgage and insurance but also for the repairs and maintenance costs. We rent and almost everything is taken care of for us and we are just responsible for the yard, replacing light bulbs, etc.. The lawn mower and weed-eater are a one-time cost and only the gas for the mower is to be budgeted.

I'm throwing home and renter's insurance in here, although its not a bonafide need - you would be better off with it than without it! Homeowner's insurance covers your home in case of fire, water damage, etc. Renter's insurance covers only your belongings. Homeowners also pay property taxes yearly and renters pay it but it is included in their rent cost.

4. Housing Extras
This is where everything else falls in because they aren't pure "needs". I'm talking about phone, internet, cable tv and any other luxury you add in. Besides the phone, you probably could do without the others if you had to for a certain time to cut expenses. We have gone without internet for 6 months to a year to save money. However, now my husband's job requires it. We don't own a TV, therefore we don't pay cable.

If you own a home, of course you will have even more extras from upgrades, renovations and additions. These are not NEEDS though, they are merely wants and you can wait on these things.

5. Car
A car is mostly a need in our society. To go to the store, work and other places you need transportation. You should never go in debt for a car! It is stupid to pay interest on a vehicle! STUPID! You can easily buy a used car with savings - even $600 because our friends have been driving their $600 car for a few years now! So having a car payment should not be a concern and if it is, you need to pay that debt off quick.

To run a car you will most likely need gas. So make sure you budget this. You can save on gas easily by staying home more and going out less. Also, budget for yearly license fees.

Car maintenance, car insurance and repair costs need to be in your budget. Maintenance deals with oil changes and so forth. Keep it up to date to keep your car running smoothly. If you want to save money in this area, simply learn to do it yourself. Car insurance is something we all should have and shop around for the best deal. Also, be aware that if you get your home or renter's insurance from the same company as you get your car insurance, you usually get a hefty discount. Also, having an accident-free record gives you a discount.

6. Food & Necessities
This is where most people can cut costs. You need to figure out how much you need to feed your family and come up with a budget for food. Then also, budget for necessities - toilet paper, toothpaste, deodorant, soap, etc.

7. Medical
Health insurance, to me, is necessary! We learned the hard way - I was in the hospital for 2 weeks with NO insurance and we are still paying that bill to this day! Let me tell you plain and clear - if you think it won't happen to you, WAKE UP! You can't say a car will not hit your or you will not get cancer - you need to prepare for these things. I could have accepted charity for my hospital bill but we knew God didn't want that and we should pay our debts. God has rewarded us and what probably would have taken who knows how many years only took a few as we are paying the last payments next month!

So needless to say, we have insurance! So budget for the monthly costs or yearly cost if you do a medical savings plan. Dental falls in here as well.  If you don't pay for your own insurance you are basically throwing the bill on someone else, so you should, as a Christian, budget for this expense.

8. Life Insurance
Life insurance is a need, especially if you have children. A husband should make sure his wife will be well taken care of in the case of tragedy. If he has children, even the more so he should insure they are taken care of!

9. School
Whether you have expenses with your child's school or you homeschool - you need to budget for school costs. Make a list of every known expense you can imagine that will occur for the year and budget for that. You can easily homeschool on $300 and sometimes more if you choose new materials. Pick your curriculum and stick with it, if its working - don't buy just to buy, unless of course, you have money to blow.

10. Haircuts
Since this is a Christian blog, I don't cut my glory - so we only budget for my husband's haircuts.

11. Clothing
This is not only clothing but shoes and socks as well. We buy seasonally - fall and spring and usually do not purchase clothing any other time. Same for shoes and socks, etc.

I don't think I've missed anything and if you didn't see something on this list, it probably isn't a need. More to come as time permits!