Putting Together a Budget: Part I

Salam 3alaikum sisters,

I had a request to show how I put together the budget for our house. A budget is definitely an ongoing process and needs to be adjusted each month. This first post is going to cover how I first developed the budget.

Step 1: I bought a ledger book to keep track of our finances. I bout the one called "columnar pad" from Wal-Mart. It is not available online but you should be able to find something similar in most stores that carry office supplies.

Step 2: Write down how much I THINK we spend on each category. My categories included:

• Rent: monthly for our apartment 
• Electric: our only utility payment, but you may also have water and gas 
• Comcast: internet bill
• Insurance: car insurance is required
• Phone: our cell phone bill
• Car Gas: gasoline, monthly average, you may have a car payment as well
• Food: include groceries and eating out, I keep note of restaurant amount as well
• Fun: like travel, movies, etc
• Netflix: monthly fee
• Gym: monthly fee
• Clothes: new clothes budget
• Laundry: detergent, dryer sheets, and coins for machine
• Heath and Beauty: medicines, make up, shampoo, conditioner, etc.
• House Items: organizational, decorative
• Savings: we are trying to save a certain amount each month

I put the name of the category in the first column then the amount I thought we would spend in the second column. You may have more or less categories than this.

Step 3: Track actual spending for a month. I keep all of our receipts together and every few days I update out budget. I separate each receipt into categories and keep a running total for each category. At the end of the week I check the bank statement online to make sure I didn't miss any receipts.

At the end of the month I will toss out all the receipts except those that I might need for warranty or return purposes. 

Step 4: At the end of the month, add up all your spending totals and compare to the predictions at the beginning of the month. This will give you a better idea of how you are actually spending your money versus how you think you are spending it. For example, we estimated the first month that we would spend $300 on food and we actually spent closer to $400. That is a big difference... 

Step 5: Use your actual spending to estimate your next months budget. Where can you add and where can you take away? For example the next month we set our food budget at $350 and made an effort to eat out less often. 

Note: Don't forget to add one time expenses into your monthly budget. For example you may know that this month you will need to change the car oil, maybe your husband needs a new pair of dress shoes, or you need to pay your zakat. Go ahead and add that into the budget at the beginning of the month so you can be prepared for the expense.

In part two, inshaAllah I will talk about some other budget options that may work better different situations.