Happy Hump Day! This week is almost over and it’s the last week of February! Where has the time gone? This is my third week on my new budget and everything seems to being going well! If you missed my last post, My Personal Debt Story, is discusses the start of my financial journey. Whether your debt free or trying to eliminate it, you will need a budget. Creating a budget can be overwhelming at first, but it is a trial and error process, you will have it down to a science in no time.
Whether you’re looking to create a personal budget spreadsheet or just get a better grasp on money management, start with these nine steps.
How to Create A Budget:
- Calculate how much money you earn in a month after taxes. For this budget plan, use your net pay or take home pay. Include tips, supplementary income, side-jobs, investments etc. This is your income.
- Calculate your expenses. Print out your last 6 months of banks statements or save your receipts for 1-2 months. Knowing your monthly expenditure on groceries or gas (for example) makes the next step much easier.
- Set your goal. Defining a goal makes it easier to stick to your budget, it helps to measure your success or failure at the end of each month. Why are you going on a budget? Maybe you want to buy a new car or get out of debt.
- Divide your budget into basic categories. For example: Housing, Food, Auto, Entertainment, Savings, Clothing, Medical, and Miscellaneous.
- List all your spending for each category. Let’s take Auto for example: $300/month car payment, $150/month insurance, $160/month on gas, $25/month on maintenance, 20$/month for registration. So, your total Auto budget for the month would be $655/month. Use your receipts and bank statements to find the exact amounts you spend monthly in each category.
- Add up all your spending by categories. This should show your total monthly spending. Compare it to how much you make each month after taxes.
- Decide on a method to keep track of your budget. You can use a good old-fashioned ledger book, excel or google sheets, and also budgeting apps and websites. Some websites and apps are Everydollar.com (website and app) and You need a budget YNAB.com (there is a charge for this website). Try a very different methods and see what works best for you.
Adjust your habits if necessary. Once you’ve done all this, you have what you need to complete your budget. Having documented your income and spending, you can start to see where you have money left over or where you can cut back so that you have money to put toward your goals.
Keep checking in. It’s important that you review your budget on a regular basis to be sure you are staying on track. Few expenses in your budget are set in stone: You may get a raise, your expenses may increase or you may have reached your goal and want to plan for a new one. Whatever the reason, keep checking in with your budget following the steps above.
Budgets are not easy nor are they fun, but once you have one set up and continue to refer to it, it will work. You will find it helps as you are now telling your money where you want it to go rather than it telling you where it is going to end up each month. Financial control – such an amazing feeling!
I hope you found these steps helpful. Leave a comment below to let me know will you use the step to create or revamp your budget?(I am not a financial advisor and the information listed within these posts is not to be construed a financial advice. Financial concerns/issues should be addressed with a professional in order to receive advice and assistance.)