Build the Homestead of Your Dreams Completely Debt-Free

Modern homesteading doesn’t typically come with all the same risks and difficulties as it did decades ago, but that doesn’t mean it’s easy, by any means. In addition to the usual challenges that come with working the land, there is one challenge you can always count on cropping up: money. While money is an issue regardless of your lifestyle, proper financing and budgeting is even more crucial for homesteaders who have chosen a way of life that carries higher risks than those who remain ‘on the grid’. Below we’re going to outline the six simple steps to starting your homestead on the right financial footing or, if you’re already established, regaining some control and security in your finances.

Documents to Have On Hand

There are a few files and documents you need to have on hand to make a thorough, accurate budget. These include:

  • Recurring monthly bills
  • Non-monthly bills (bi-monthly, annual, etc.)
  • Regular monthly expenses (like gas for your car)
  • Irregular but anticipated expenses (like new tires)
  • Large, upcoming expenses
  • Debt (credit cards, car payments, loans, student debt, etc.)
  • Receipts (especially from large purchases)

It can be a tedious process trying to gather all these things together, but it’s not only necessary to maintaining accurate accounting, it will also make the whole process easier once you get started. If you don’t keep physical receipts or find you’re missing a few, start looking through debit and credit card transactions. If you don’t have a receipt and you paid in cash, record the closest estimate you can and make sure, in the future, to either hold onto receipts or record what you spend in cash when you spend it.

Step 1: Choose Your Format

The first decision you have to make is whether you will keep a physical, hard-copy budget or a digital one. While a pen-and-paper budget is simpler and more straightforward, we strongly recommend keeping a digital version if at all possible. A digital copy won’t be destroyed by a bumped cup of coffee, won’t be scattered in a strong wind, and can be shared with multiple people at once.There are countless complex options for digital budgeting, but you could keep it as simple as a Google or Microsoft document.

If you’re really attached to having a physical budget, consider having both a physical and digital copy (maybe just print out your digital copy) to minimize the risk of all your hard work being lost. At the end of the day, there’s one very simple rule for choosing your format: Choose what you’ll use. If you pick one option or the other because you think it will look nicer or because you want to be ‘that kind of person’, you’ll use it for a little while and then give up because it’s a chore. Budgeting takes practice and can be grueling, so it’s important that the method you utilize is one you can stand to stick with.

Step 2: Record All Income

In the income section, record any and all income streams for the entire month. Whether it’s $20 or $200, write it down. Record steady income as well as anything that may be subject to irregularity (just make a note so you remember this one isn’t a for-sure). Go the extra mile and include any ‘payday’ dates that you can so you know exactly when things are coming in and what you’ll have at any given time.

Step 3: Record Monthly Bills and Their Due Dates

If you’ve successfully gathered all the documents, this part will be easy. Including the date that each bill is due is helpful, especially if you have a few different income streams that come in at different times. Coordinating these dates will allow you to plan for when to pay each bill throughout the month.

Step 4: Record Other Monthly Expenses

‘Other’ monthly expenses are expenses that aren’t bills (phone, water, electricity, etc.) but nonetheless have a steady presence from month to month (like gas, pet food, or hygiene products). Sort these into categories, especially if the list is long or you’re providing for a large number of people. The categories can be as broad or as specific as you like, but in this case, specific is usually better.

Step 5: Calculate and Record Monthly Savings

This is where the non-monthly bills and large, anticipated expenses come in. Calculate how much all of these are going to cost and divide the number over the twelve months. This basic math will tell you how much you need to save every month to manage the upcoming expenses without relying on a credit card or a loan (and thus, staying out of debt).

Step 6: Calculate Carry Over

Once you’ve reached step 6, you should have a thorough and precise recording of all your income streams and expenses. Now you need to calculate or use a built-in formula (available in multiple apps, like Google Sheets) to calculate what you have leftover after all your bills and expenses are paid. You will either break even (which is good) have some left over (which is great) or be in the negatives, aka debt (which is bad). If you come up with a negative number, first check to make sure all your inputs are correct. If they are, revisit some of your expenses and see where you can cut back. The goal here is to maintain your homestead completely debt-free.

Why Budgeting Is Necessary For You

Budgeting is necessary for anyone and everyone who uses money (so, everyone). Your specific budgeting needs will vary depending on your age, career, lifestyle, health needs, etc., but the overarching goal of knowing where you stand financially is what every adult should aim for. In this case, there are a number of reasons that budgeting is especially crucial for homesteaders. These reasons include (but are not limited to):

  • Pursuing this lifestyle makes unexpected emergencies more likely (loss of power, animal medical care, etc.)
  • Homesteaders experience seasonal expense increases- this could be anything from weather-proofing your home to purchasing seeds and tools for planting and harvesting
  • Homesteaders make more regular use of heavy tools and machinery, which will inevitably need maintenance and repairs
  • Homesteading can provide varying income streams from month to month. One month you could have a comfortable amount of income left over, and the next you could be in dire straits.
  • New homesteads can take a while to begin turning a profit, especially if you’re a first-time homesteader.
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