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Building a budget for the homestead can be much more challenging for homesteaders than for a regular household. Costs of feed are much higher than those of a cat or dog. Are vegetable seeds categorized as grocery or garden? Are you tracking the savings you’re getting from having your own eggs? Do you track the money you make when someone buys a dozen of the surplus? The budget is key to homestead management.
Homesteaders are seeking self-sufficiency so they can escape the rat-race of suburban living, and as such, try to make money off their homesteading. The ability to budget and manage money is critically important. You don’t want to make a mistake with your money that causes you to pay extra taxes, or worse, get you audited. Plus, you want to make sure you’re able to track your expenses in things like feed and livestock care supplies so that your charging enough to cover those costs and still take care of your family.
While many folks from older generations are aware of building a budget, there are quite a number of younger people who have never been taught how to manage their money and make a budget. 38% of Americans don’t have a budget! 65% of American’s have no idea how much they spend in a month.
If you already know how to budget, then I strongly encourage you to find ways to help others learn the skill! If you don’t know how to budget, this post will discuss some budgeting basics that will help you build a budget that covers any home’s basic needs.
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Building a Budget
Building a budget requires two basic elements: knowledge of your total net income on a monthly basis and a list of your expenses. Most people gather their list of expenses by pulling up a few months of bank statements, creating a list of regular purchases or bills, and writing down how much is spent.
Each regular expense will become a category in your budget. You can break these expenses down into as many or as few categories as works for you. For example, when you buy groceries, do you also buy house cleaning items? Do you want to separate those purchases into House Cleaning and Groceries, or do you want to have one category of Groceries or House Groceries? The name and number of categories is entirely up to you, but you want to make sure that you always know what items are covered in each category.
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You’ll want to take an average of each expense category over the months you chose to look through. You take an average by adding together the amounts then dividing by the number of amounts added. For example: To create an average of your electric bill, you would take how much you paid each month for each statement. If you chose to look through six months of bank statements, then you’d add together the amount paid to your electric company each month. Then you would divide by six because you added together six amounts.
- March: $119
- April: $109
- June: $95
- July: $137
- August: $145
- September $118
Total: $723 divided by 6 months of statements = an average of $120.50 in electricity every month.
Once you have your average costs for each category, you can begin to create your budget. Whether you create one using your computer or on a sheet of paper, you’ll want to start with a table that has your net income (that’s the amount your paycheck is worth after it’s deposited in your bank account with taxes and other amounts removed), and then each of your categories with their expenses. It may help make things easier to split items up a bit further and separate income and bills by date.
It will probably look something like this:
First Check: $1450
- Rent/ Mortgage: $650
- Utilities: $175
- Grocery: $200
- Dining Out: $125
- Internet: $115
- Fuel: $150
Total Expenses: $1415
Second Check: $1550
- Cell Phone: $75
- Credit Card 1: $150
- Car Insurance: $100
- Car Payment: $615
This is a basic but effective budget. This is very similar to the budget Husbando, and I used for the first few years of our marriage. When you don’t have much, budgeting is incredibly easy! But simple or not, it is a fully functional budget that will meet the base needs of any household. It’s a critical tool! When you sit down and budget, you build a visual picture of how much money you spend versus how much you bring in. If you’re looking for something a little more intense, check out the homestead management printables from Homesteaders of America!
As you can see in the example, there’s barely any wiggle room during the first paycheck period! If you have a sudden expense and no saving during that pay period, you’ll have to find a way of borrowing money to cover it. The most common way of borrowing money is via financing through a banking establishment, which comes with interest rates. Over time, when you borrow money that comes with an interest rate that you don’t pay off by the end of the first billing cycle, you will end up paying MORE than you borrowed.