President N. Eldon Tanner advised, “Many people think a budget robs them of their freedom. On the contrary, successful people have learned that a budget makes real economic freedom possible.” (Ensign, Nov. 1979, p. 82.)
President Heber J. Grant advised, “If there is any one thing that will bring peace and contentment into the human heart, and into the family, it is to live within our means.”
Elder Marvin J. Ashton advised, “Every family must have a predetermined understanding of how much money will be available each month and the amount to be spent in each category of a family budget.”
Most people will estimate what their income is or will be, and plan how much money they can spend on food, housing, and transportation. In the simple terms, this is a budget. But in order to achieve real financial success and security, it’s important to write the budget on paper and not just keep it in your head.
What is a Budget?
In order to create an efficient and realistic budget, follow these initial steps that will help you identify expenses and establish financial goals:
1. Identify needs and wants.
2. Prioritize needs and wants.
3. Categorize your needs and wants into three goals: long-term, intermediate, and short-term.
1. Identifying needs and wants
Needs are necessary expenses like house payment or rent, utilities, food, insurance and medical expenses.
Wants are other expenses that are not necessarily “required” for day-to-day survival like vacations and toys.
Activity:
Write a list of things you have purchased in the last few weeks. By each one, put an "N" if you feel it is a need and a "W" if you think it's a want. Share your list with other people and see if they agree with your perspective.
If you have trouble determining if something is a need or want, follow the old pioneer motto that President Hinckley has repeated, “Fix it up, wear it out, make it do, or do without.”
2. Prioritize needs and wants
Once you have differentiated between your needs and wants, you can then create a prioritized list. Sit down as a family or by yourself and list all the needs and wants, then list them in order of importance. You might be surprised by your priorities.
3. Categorize needs and wants into goals
Lifetime (long-term) – These goals are dreams that every family hopes to realize. They could include plans for extensive travel, missions, college tuition, wedding, a larger house, and even a second home.
Yearly (intermediate) – These goals are expenses that only occur once a year. The key to this type of yearly planning is to identify the peak expense periods and the peak income periods and try to balance the two. Yearly expenses could include family vacations, Christmas, and car registration, back to school and insurance payments.
Monthly (short-term) – These goals are merely a breakdown of yearly and lifetime goals. Establishing goals on such a short-term basis requires you to incorporate yearly and lifetime goals into your day-to-day living.
Creating a Budget
With your needs and wants identified and financial goals established, you’re ready to create a budget.
Here is an example budget sheet.
Budget sheet in PDF format
Budget sheet in Excel format
To use the sheet, fill in the budget columns with amounts you estimate for each category. Make sure the total is less than your income. Then enter how much you spent each month on the various items to see whether you stayed within your budget.
The key to creating a successful budget is discipline! However you arrange it, you must ensure that you spend less than you earn. While prudent debt is an exception to this rule, you still need to have a realistic plan to pay your debts off as they come due. Stick with it and you’ll reap the benefits of financial freedom and security.
Words to the Wise
(Credit: “Debt Free on Any Income")
- Keep your expenses at a lower level than your income.
- Avoid impulse spending.
- Pay as you go.
- Account for as many expenditures as possible.
- Always keep a “rainy day fund" for emergencies and special occasions.
About the Author:
Chris MacPherson is our Assistant Vice President of Operations. He loves spending time with family and friends, playing football, wrestling, painting, reading, and being outdoors.
