Homesteading and being self-reliant are all about saving money and budgeting. It’s about reusing things over and over and being frugal. It is also having to come up with money when you don’t have it on hand. That’s where learning about budgeting comes in handy.
What is a Budget
A budget is a means of knowing where every bit of money needs to go. It is about planning for the unknowns and still paying the expenses your homestead journey incurs. A budget is an estimate. It is a plan for knowing what to expect each month or week.
A budget can be on a computer spreadsheet, on a blank piece of paper, or even on a whiteboard. It is written or typed up prior to income coming in and shows what money needs to go where. A budget is updated and reviewed very frequently.
Steps for Budgeting
Budgeting is not a quick process at all when you first get started. There are a number of steps you should follow in order to correctly make your first budget. Once your budget is written down, you will constantly be reviewing and making changes as time progresses.
Let’s break down each of the steps now…
Budgeting Step 1: Gathering Your Information
The first step in creating your budget is to gather all your bills, any income information, and any savings information. You need this information before you can start a budget.
This information can include:
- Monthly, quarterly, and annual bills
- Pay stubs or salary amounts
- Other income sources
- Savings account information
- Copies of receipts that you have saved
Of course, there may be more financial information according to your particular situation but that is the basics to get started. Once you have gathered these documents, move on to step 2.
Budgeting Step 2: Listing Your Income
The first thing you want to do is grab a blank sheet of paper and list all your sources of income. These may include; salaries, homestead income, child support, dividends paid from stocks, etc… List each one, and next to the type of income put the total that you receive from each source per month.
Once they are all listed with the amounts, total all the amounts for the month and make a grand total. This is your total income for the month. Now we can go on to step 3.
Budgeting Step 3: Listing Your Fixed Expenses
Your fixed expenses are the bills or debts you pay monthly that are set amounts. They do not go up or down, they always stay the same.
Examples of fixed amounts:
- Mortgage Payment
- Car Payment
- Student Loan
- Personal Loans
- Monthly Subscriptions
- Cell Phone Bill
- Cleaning Services
- Insurance Premiums
- Child Support
List all of these fixed expenses by title and how much the payment is monthly in a list. Total all your fixed expense amounts. Now move on to step 4.
Budgeting Step 4: Variable Monthly Expenses
Variable expenses are the debts you pay regularly but the amounts may change monthly. These expenses are harder to put an exact amount to because they are always changing. List all your variable expenses as above.
Examples of variable expenses:
- Credit Cards
- Utility Bills
- Rental Services (Equipment etc…)
- Gardening Supplies and Tools
After listing these expenses out try and figure out a general amount that you pay each one monthly. If you are not sure what amount to use, try the following suggestion. Look through your checking register for the last 12 months and write what you paid each month. Total the amounts and divide by 12. This will give you a monthly average to use. Once you’re done, move on to step 5.
Budgeting Step 5: Other Regular Expenses
Now is the hardest part. You need to think about what other monies you pay out monthly. In other words, the expenses are always changing but must be paid nonetheless.
Examples of these expenses include:
- Child Care
- Auto Maintenance
- Animal Feed
- Veterinary Bills
- Doctor bills
- Equipment repairs
- Household Maintenance and Repair
- Educational expenses
These expenses can be limitless and are different for everyone. Try and come up with an amount that seems reasonable. Look through your credit card statement and bank account for reminders as to what these expenses may be.
As before, list each one with an average amount you may spend. You can look at what you spent in the prior year for a total and again figure out an average if this helps. Once you have written in all the amounts, again total the column. Now move on to step 6.
Budgeting Step 6: Putting It All Together
The first step is to take the total of each category of expenses and total them all up. Besides the total expenses, write the amount of your total income. Is your income amount higher than your expenses? If it is, you are off to a great start.
If your expenses are higher than your income, you are probably needing to make a budget more than you are aware. Don’t be disappointed. Making a budget, and getting into the habit of doing things like checking what savings there are to be had on shopping, will help you plan your money better.
Okay, Let’s set up a final budget…
Setting Up A Budget On Paper
When setting up a budget on paper there are many formats you can use. I like using Google Sheets for my monthly budget. It allows me to enter everything I pay out and everything I bring in. I have made an example budget to share with you.
As you can see in the example above, you can change any of your income or expenses to match your situation. The spreadsheet does the math for you. What I really like is that you can also add more rows if needed. This worksheet can work for everyone.
On the second page of the spreadsheet is a wonderful ledger to allow for more specific details for each of your expenses and income amounts. See the screenshot below.
Some advice I have for you when it comes to budgeting for your homestead is to first, think ahead. Jot down all the things you spend money on each month. You can do this daily for a week or even throughout an entire month first. This way you have a better idea of what you spend.
Once you have all the information start plugging in your numbers in a budget form. Don’t fret if you don’t meet your budgeting goals for the first few months. That’s the beauty of a budget. It can change and be customized to what you need it to be.
Do you have a budget in place for your homestead? Tell me about it in the comments below.
Looking for an Income and Expense Spreadsheet specifically for homesteaders? Check out The Farm Wife. She also has tons of information on saving money too.