A few weeks ago, I mentioned the advantages of having a budget. Much of the post is based on Dave Ramsey’s envelope budgeting system but several items are changed in order to adjust for Israel’s financial system.
To sum up, building a budget lets you tell your money what to do before it tells you.
And it really does not take long. At first, my wife and I thought it would take hours, but after the first time (which was 30 minutes), we found that the entire process takes about 5 minutes a month.
This file contains my budgeting software. (If the link does not work, go to http://www.mediafire.com/?tftkjqmjyyi). As you’ll see it is a simple spreadsheet. Once a day, my wife or I type in whatever money we spend under the column for the appropriate day and into the proper spending item. It takes about 15 seconds and gives us tremendous peace of mind financially.
Because pay in Israel comes in by the 10th of the month, I believe that the fiscal calendar for spending money should begin on the 15th. This allows one to plan how to spend the money he or she received in an organized manner after he or she sees that everything already hit the bank.
In order to use the spreadsheet, a couple of items need to be explained:
Inflows (to be filled in): Add up to five sources of income for the month. This includes any salaries earned, any presents received, and any money found. If you got money overseas, then just add it in shekels at the approximate rate. Remember, we’re trying to be imprecisely right, not precisely wrong.
Outflows (to be filled in): This should include every category of money you spend. Every time a shekel leaves your domain, you gotta stop it and say “hey! who are you and where do you think you’re going?!” You can change the categories to match whatever you spend (note: for your convenience, I arranged it so that changing the name of one expense category will change the names in all the subsequent months as well). I personally have fewer categories, but I left some open in case you need more.
Now (to be filled in): This is where you should be entering all the money you will allot for the current month. Make sure that at the bottom total outflow equals total inflow. Every shekel has an address. You tell your money what to do, not the other way around.
Pre (do not fill this in. This will fill itself automatically): This is the outstanding balance from the previous months. I greyed this out for the first month, because it will be blank. In subsequent months, this will be filled in automatically so you know how much you already have left over from the previous month in each category.
Total (do not fill this in. This will fill itself automatically): This column tells you how much you have to spend on a particular expense. This adds the amount you put into “now” and the amount in “pre.”
Remaining (the last column): This column tells you how much money you have remaining for a particular expense. This should never be in a minus. If it is then you (and your spouse) need…
an emergency budget meeting: This is when you (and your spouse) sit down and rearrange how much you allot in each category for the month (in the “now” column) and change some numbers so that you do not have a minus for any expense under “remaining”. Remember, if you raise the amount for one category, you have to lower it for another category. In the end, total inflow must equal total outflows.
Sooner or later you will need to look over your finances. And believe me, planning how you’re gonna spend your money is a whole lot more fun than wondering where it all went. Good luck!