still using a ledger almost ready for the next step

You’re close to finalizing a budget. You are keeping track of your spending and recording your figures. You’ve compared your income and your expenditures to see how they correspond and you’ve looked at your recent spending patterns to find where money saving changes can be made. You took a major step in money management when you assigned allotments to the various categories in you ledger. That ledger, along with your budget, is still a work in progress but you will soon have it in working order.

You have been using the figures from your little notebook that you organized under your spending categories to decide what your allocations would be. I mentioned at the end of my last post that you might be changing some of those allocations. You also might need to incorporate some new categories in the ledger.

The figures you’ve been noting are a record of your current expenditures, but there are some that are occasional—birthdays, anniversaries, holidays, maybe even items like quarterly insurance payments; you may have others. These need to be taken into account, as do your larger bills like housing and car payments. (Maintenance and repair of home and car might be included here, too—if you have not already taken them into account). Bills that fluctuate seasonally (like utility bills) need to be addressed also. Many of these expenses are next to impossible to cover with one paycheck, especially if you want to have funds to get you through to the next one.

Look back through your last 12 months of checkbook entries, and statements. (If you don’t have copies of these, they can often be found online or ordered from the banks and other institutions you do business with.) Get a reasonable idea of what you spend on each of the variable expenses. Then, divide each sum by the number of pay periods you have. The figures you get will be the amounts you set aside as averaged “partial payments” every payday. (Doing this can save you from a lot of panic as the due dates for these bills approach.)

As you are still setting up your ledger, there are two more categories that are essential to include. One is an Emergency Fund. The other is Savings. Sometimes, especially when a person is new to budgeting (and, maybe, desperate) these have to be combined. Do assign some funds to this (the more, the better; but something) with the intention of accumulation. If a “rainy day” does come along, it can be grey, not pitch black.

The funds you have been allocating to your categories have been based on comfort (wouldn’t that be nice?), or more likely, necessity. Financial experts tell us that allocations should be percentages of income. That’s an ideal; I will address it in another post.

We have to deal with reality. Most of us, probably, would not choose to budget if we didn’t need to. The truth is, whether we do it because of need or not, it does allow us more control of our money. For now, assign your funds as is best for you. You now have a budget. Start telling your money what to do.
With your ledger set up in categories and figures set for reasonable distribution of your income, you should have a working budget. As I’ve said before, it is a work in progress. In my next post I will address some issues to help you in the refining process. Meanwhile, continue to carry your little notebook. Record your expenditures as they occur and transfer them to your ledger. Use your budget as your spending guide.