The first step to actually creating your budget is to do a master budget. Later in the week I’ll be showing you how to create your working budget using a variety of tools. The Master Budget Excel file I’m using in the screencast will be made available to newsletter subscribers. You can also do your master budget using paper and pencil if you prefer that.

What is a master budget?

A master budget is a temporary document that helps you prioritize your budget categories and help ensure you have the money in your account when you need it. This is very important because when you first start budgeting you run the risk of overdrawing your account. The master budget also helps you see if you have enough money to meet all your budget categories and allows you to make adjustments before you create your working budget. It’s kind of like a template of sorts and you’ll use it as a reference tool for creating your first 1-3 budgets.

Once you get a month ahead and can budget for this month with last month’s money, you won’t need to use the master budget anymore because you’ll already have all the money you need for the month and won’t have to worry about timing.

How to prioritize expense categories

There are three ways to prioritize your budget categories:

1. By Timing – You first want to make sure you have money for your set bills. Some people will run into a scenario where they have enough money for their monthly bills overall, but maybe they all come due in the first half of the month and your first paycheck won’t cover them all. In a situation like this, you’ll want to contact the companies and see if you can change some of the billing dates to the second half of the month.
2. By Importance – Make sure the most important categories are funded. These can be needs such as food, clothing, housing, and transportation. These can also be things you value like savings, charitable donations, or power money.
3. By Need – Even though groceries are very important and must be budgeted for, you may not need all of your grocery money budgeted for your first paycheck. Maybe you only need half now and half in the second part of the month. In contrast, maybe a category isn’t at the top of the list in importance, but you need the money earlier than other categories.

A word about Excel

I’m going to use Microsoft Excel a lot throughout this course and I consider it a basic personal finance skill. The Master Budget file that is available to newsletter subscribers is not protected and the formulas can be changed or deleted. I did this on purpose so that people would be encouraged to play around and see how I’ve created this document.

If you feel like Excel is confusing or threatening, please let me know and I’ll create some tutorials showing you the basics of excel.

Master Budget Download

The master budget excel file will be available to newsletter subscribers. You can also do a master budget on paper or in your own excel spreadsheet. There’s nothing magic to my spreadsheet, it’s just created to save you some time.

Share on Facebook

More From sjpeer

• How to create a zero-based budget
• How To Create Your First Working Budget With YNAB
• 3 reasons most budgets don’t work and how to fix them (a.k.a. How to create a budget that works)

Ask sjpeer To Recommend Your Posts

Week 3 of the 12 Weeks to Fiscal Fitness will consist of several parts. The first part is the podcast below which talks about the 10 secrets to budgeting success.

Later in the week I’ll be releasing additional posts containing screencasts that show you specifically how to create your budget using various tools. You won’t have to watch everything, just the ones that apply to your situation.

Because there’s so much content this week, it will probably stretch out to more like a week and a half. This will also give you more time to finish the assignments.

This is one of the most exciting weeks because your budget is the most critical piece for helping you control your money. In week 4 I’ll be talking about another concept that goes hand-in-hand with budgeting. Together these two concepts will help you rock your budgeting world.

So, please, download the podcast right now and start listening.

 

 Week 3 - 10 Secrets to Budgeting Success [61:00m]: Play Now | Play in Popup | Download

Share on Facebook

More From sjpeer

• Using Cash In Your Budget – Week 4
• How To Create Your First Working Budget With Excel Or Pen And Paper
• 12 Weeks to Fiscal Fitness – Pre-launch Podcast

Ask sjpeer To Recommend Your Posts

This week will be a simple one.  Last week you had a big assignment to create your personal financial binder and this week we’ll be adding the Net Worth Statement to the binder. 

I will be sending out a copy of the excel spreadsheet I created to newsletter subscribers so watch your inbox.

Part 1

Part 2

There are a couple of guidelines to follow in creating your first Net Worth Statement:

1. Don’t go overboard and try to include all your possessions in the first version.  You should only include your house, cars, and at most 1-3  of your most valuable possessions.  Then, every time you update your statement you can add one or two more items.  Over time you’ll have quite a comprehensive record of your possessions.
2. The first statement should take you 20-30 minutes to create.
3. If you haven’t completed your List of Accounts and List of Debts for your financial binder, please do so first.  This will make creating your net worth statement much faster and easier.
4. In the screencast I mention three resources for determining the value of your assets:
• Zillow.com for real estate.
• Kelly Blue Book for vehicles.
• Ebay using the “completed listings” search for general possessions.

5. Here’s a list of items you may want to include in your net worth statement
• Assets
• Cash
• Checking accounts
• Savings accounts
• Money Market accounts
• Stocks, bonds, CDs
• Market value of your home
• Major household items
• Market value of other real estate
• Rental property
• Time shares
• Vacation homes
• Market value of cars
• Value of Cash-value life insurance
• 401K accounts
• IRA and Roth IRA accounts
• Liabilities
• Mortgage
• Lines of credit (HELOCs, etc)
• Auto loans
• Credit card balances
• Student loans
• Other loans
• Owed taxes

There are several advantages to creating and updating a net worth statement.

1. Your net worth is a single number that reflects whether you are making progress financially or not.
2. Recording a list of your possessions can act as a safety measure if you were to be robbed or have a fire and needed records to get reimbursed for insurance purposes.
3. Updating your net worth statement keeps you in tune with your various accounts and amounts in them.  It increases your overall financial awareness.
4. In recording possesions and their worth you may uncover some assets you can sell for a healthy profit and put those assets to use in a more valuable way.

As always, leave any comments or questions below and I’ll do my best to answer them.

Share on Facebook

More From sjpeer

• How to Create a Master Budget
• How To Create Your First Working Budget With YNAB
• How To Create Your First Working Budget With Quicken And Excel

Ask sjpeer To Recommend Your Posts

Here’s week 1 of 12 Weeks to Fiscal Fitness. This week I detail how to create your personal finance binder. You can listen to the podcast below and read the article I previously wrote entitled How to create a financial binder.

There are a couple of audio glitches in the podcast so don’t be alarmed or think it’s your mp3 player. It turns out I need to disable my screen saver while I’m recording. Also, I compressed this podcast more than last week to keep the file size down. Please let me know if there are any compatibility issues playing the podcast.

I’ll be providing some additional resources for newsletter subscribers later in the week including:

• List of accounts form
• List of Bills form
• Decision form
• Savings goals forms
• Net worth spreadsheet and screencast – UPDATE: I may delay this to a later week because it may take too much time with the other assignments.

Here’s a link to the Annual Credit Report site where you can get your free yearly reports.

Man I look like a smurf in the video below. I’ll have to work on my lighting.

Your assignments this week are as follows:

• Create your personal financial binder. Don’t worry about filling out all the information in the binder. Instead, just make sure you’ve created the binder and fill in as much information as you can.
• Start using cash exclusively in three budget categories: one that each spouse chooses and in the grocery budget category.
• Try to automate as many of your bills as possible. See if you can get on an even-payment program for your utility bills (specifically gas and electric).

As always, leave your comments, experiences, and questions in the comments below. Let me know how the assignments are going. Are they too hard and confusing? Are they too easy? Do they help?

HERE’S THE PODCAST:

 

 Week 1 [36:37m]: Play Now | Play in Popup | Download

Share on Facebook

More From sjpeer

• How to Create a Master Budget
• Using Cash In Your Budget – Week 4
• Options for Creating Your Working Budget

Ask sjpeer To Recommend Your Posts

I’ve just made a Spouse Agreement Contract available in PDF format to the newsletter subscribers. I’ll be sending an email out to existing subscribers with a link. If you haven’t subscribed to the newsletter yet, you can get the document by doing so.

The short video below describes how the contract works and why it’s important. It may seem a little cheesy, but signing the document and having your spouse sign will really increase your commitment to the program.

Share on Facebook