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how to make a budget

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legal warning: The information here should not be understood legally as financial advice. If you believe anything on this site is in error, please contact me. I am always open to corrections, new ideas, and new opinions...

One of the most important monthly rituals in my house is making a budget.  My wife and I sit down somewhere between the 10th and 15th of the month in order to determine how much we can spend in the coming month and how we will build our life.  I personally prefer to make a budget from the 15th to the 14th of the next month, because by that point I know how much money I already received from my primary source of income (by Israel law, employees must be paid no later than the 10th).

It is important that both the husband and wife work together to agree on this budget.  This does not mean the wife just lets the husband do what he wants and she agrees; she must be part of it.  I have heard plenty of couples who financial problems start with the fact that one spouse controls all the money.

Making a budget means assigning an address to every shekel you earn, telling it to do before it tells you.  In order to do this you need to determine two things:  your inflow of money and your outflow of money

inflow:

Include any money you have received in the past month.  This includes any money you earn, your spouse earns, and any money you receive as a gift.  For example

₪300 from Bob’s birthday
₪100 from Sue babysitting
₪3000 Sue’s paycheck
₪2000 Bob’s paycheck
₪5400 total

As you can see, we’re dealing with only ₪5,400.  No more.  There is no spending anything above this without going into savings, or even worse, debt.  If you need more, then realize what you will have to do, and consider how you will need to pay it back.

 The next thing is to list our outflows of money.  I prefer to list them by order of flexibility.  For example, I cannot change the amount I pay for rent, but I can change how much I eat out.  Obviously your list will vary.  It may even vary every month; that’s fine.  The important thing is that every dollar you have has an address.

 Finally, fill in the amounts starting from the least flexible to the most

₪2600 Rent
₪150 Internet
₪500 Electricity
₪200 Water
₪100 Phone
₪300 Transportation
₪100 Medical
₪1000 Groceries
₪50 Clothes
₪100 Eating out
₪100 Misc
₪100 Charity
₪100 Savings
₪5400 total

Your inflow must equal your outflow.  Every shekel you make has to have an address.  If you get some extra money during the month, you can either choose to add it to your current month (add the money to you inflow and outflow) or save it for the next, but do not do what most people do and spend it both times.

A wise woman once told me that every budget is a fiction; it’s just a matter of how historical your novel is.  If you see that something is not working in your budget, or that you are going to have to break a limit on something, then call an emergency budget meeting with your spouse where you both determine what you will have to change in order to ensure that your inflow still equals your outflow of money.

I personally keep an excel file on the desktop of my computer than will automatically subtract any money I type in and tell me how much I have left.  Some people I know like to keep a countdown of how much thay have left to spend in each catagory on the fridge.  The important thing is to be aware.  Once you have a budget, you’ll be surprised how much more easygoing you’ll be about spending money.  No more guiltly meals out and regretful splurges.  Next time you go out, you’ll kow that it is exactly what you can and should be doing with your money.


6 Comments

  1. Jo Guy says:

    Come on now, charity has to be at least 10%!

    And for all those interested in guaranteed Torah wealth by way of charity, the Torah promises you will be repaid 10 times whatever you give to charity. If you only give 10%, your overall inflows will not increase if you get back 10 times and give away 10%. So be sure to give 11%, and then when you get back 10 times and give 11% your overall balance will grow 🙂

    Also, what about cell phones? Israelis have cell phones. Also there’s the gas bill, the va’ad bayit, the arnona, bank fees…just seems like whatever budget you make, it’s NEVER enough coming in 🙂

    Thanks for another great article!

    • jonnydegani says:

      Thanks for the kind words. I agree wholeheartedly with your point about ma’aser. Always include God in your finances; otherwise, He’ll exclude you.

      As with all lists of this type, your individual expenses may vary. The important thing though is to plan where your money is going so you know where you can cut and take control of your money.

  2. newshiny says:

    I was once told that the way to go about it is to budget to live on 70% of your income.

    10% goes straight to G-d (by way of Tzedaka)
    10% goes to short term savings – save up for the holiday, new bathroom, etc
    10% goes somewhere not to be touched. If needed, it can be used in an emergency (that life saving operation your HMO won’t pay for)

  3. LeahGG says:

    In general, I agree. In practice, we don’t re-budget every month. We have fixed expenses plus fixed savings that go before we touch the rest. Then there’s a little bit of flexibility with what is left. It has to buy food, clothes, diapers, extras. How that divides up has more to do with what is on sale and what comes up on a given day. For example, the past three weeks, there have been several great sales on diapers (as low as 30 shekels a pack). We’ve put pretty much every extra cent we have into diapers, knowing that we won’t have to buy diapers at 55-60 shekels a pack for the next 2-3 months. Sometimes, it’s worth going into short-term savings for something like that if you can be responsible enough to put the savings back in.

  4. Deb says:

    do you have a twitter account or some way to let me know when you update your blog- every time I read your blog I really enjoy or learn something valuable
    thanks

    • jonnydegani says:

      I haven’t gotten the hang of twitter yet. I hope to in the coming months, but in the meantime, you’ll have to just check every couple of days. Does anyone know if wordpress has something you can use in order to get updates from blogs sent to an e-mail?

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