How to Plan a Monthly Budget for Home Finances
Planning & Budgeting with Dave Ramsey’s Plan for Financial Peace
Dec 11, 2008
Callers to the Dave Ramsey Show often ask questions about home finances. Ramsey’s advice is to begin with monthly budgeting and to plan ahead for the month or pay period. But many couples new to planning and budgeting find it hard to know what expenses are going to come up each month.
How to Begin Planning and Budgeting
The first step to planning and budgeting is to create a budgeting system that includes all money that comes into the home and all the expenses that go out. Some couples can handle personal finances on paper and others need budget software like Quicken.
Either way, begin by setting aside money for the monthly obligations that are fixed. Car payments, student loan payments and mortgage payments fall into this category. These items do not change each month and are the easiest part of home finances to estimate. If possible, sign up with water companies and other utilities for the level-payment plan to even out utility bills to a fixed amount each month.
Build a Budgeting System
Some parts of the home finances are going to be less predictable. For the bills that cannot be set as a fixed amount, look at several months of statements to come up with an average amount to put in the budget. Even if it difficult to plan a specific amount for groceries and food purchases, estimates can be made as part of the budgeting system.
The first couple of months, plan a little bit on the high side of the average to ensure there will be enough money to pay the bill. If the bill is lower, save the extra money to go toward next month’s bill if it is higher. For example, married couples using Dave Ramsey’s envelope system may decide to budget $75 toward medical expenses and co-payments. If only $50 is used one month, the extra $25 should remain in the medical expenses envelope for next month. If there is repeatedly money left over, the budgeted amount is too high and should be adjusted.
Home Finances and the Monthly Budget
The next step is to look for events that are coming up during the pay period or the month ahead and include them in the home finances. Are there any family birthdays or holidays? Are there any planned trips or parties? The budgeting system should set aside a specific amount for birthday gifts, gas money, party expenses or holiday food. Are any annual or biannual bills coming due? Ideally, large bills like property taxes should be broken down into monthly amounts that are set aside to pay the bill when it comes due. When this isn’t possible, try to break a large bill up over one or more pay periods. With planning and budgeting experience, it is easier to know how far in advance to anticipate expenses.
When married couples begin to plan a monthly budget it can be hard to establish a budgeting system. It can be difficult and confusing to understand home finances and to know what expenses are going to crop up over the course of the month. After a few months of planning budgeting, however, it gets easier to plan ahead for upcoming expenses. Married couples can use paper and a calculator or budget software to keep track of monthly budgeting.
Those interested in personal finances might like to read Dave Ramsey’s Financial Peace Revisited [Viking Adult, 2003] or Total Money Makeover [Thomas Nelson, 2nd edition, 2007]. Budgeting tools are available at DaveRamsey.com.
For more about marital finances, read Money Tips Newlyweds Need, Separate or Joint Bank Accounts?, and How to Stop Arguing with a Spouse about Money.
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