Basic budget ingredients
I’ve seen quite a wide variety of budgets over the years, ranging from three or four things written on the back of a cocktail napkin, to high-tech spreadsheets that would make NASA look stupid.
More often than not, they’re either too simple or too complicated to be effectively used. If they are too simple, you lose the ability to understand exactly where your money goes and why. If they are too complex, you overwhelm yourself with data to the point of becoming paralyzed by all your options.
I’d suggest a middle road that starts with our formula for discretionary income. In other words, there are three categories that all budget items fall into: income, fixed expenses, and variable expenses. Within each one of those categories, you will break down your expenditures by company, payee, or store. In other words, you’ll put everything you buy at ABC Supermarket on one line, instead of breaking it down into further categories such as dairy, meats, cleaning supplies, etc.
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