A budget may seem unnecessary or a lot of work. But really, knowing where your money is going holds so much power! If you have financial goals (if you don’t, maybe start thinking of some!) they will be so much easier to accomplish when you know where your money is going!
Why make a budget?
Creating a budget wasn’t something I was really taught growing up. I really wasn’t sure what happened with money at all! And then I moved out and relied on credit cards whenever I ran out of money. They were like cash to me and I just assumed I would always hold a credit card balance and just make minimum payments and that would be enough! I just thought that this is what people did.
After filing bankruptcy at 21 I knew something had to change. I won’t say it happened right away because it certainly didn’t. But over time I have come to really appreciate budgeting and it’s become a passion of mine!
What is a budget not?
A budget is not taking all the fun out of your life! I’ve heard that from so many people! “If I follow a budget I can’t do anything fun with my money!” And that is simply not true. You will set aside money for fun things, and you may find you have more than you thought to go towards that!
This may seem overwhelming but take your time and know that this budget will give you freedom in spending your money, even though at first it may seem restrictive!
How to get started with making a budget:
To get started with the absolute basics, you need to have an idea of how much you make every month and about how much you spend each month. If you haven’t ever thought about it before this can take a little while to get used to! You can use a spreadsheet or just a notebook to start writing things down.
Start with your income.
Is it set? If so, write out how much you make monthly.
If it fluctuates based on an hourly rate, look over the last 3 months and take an average.
Next think about your expenses.
Fixed expenses are things that happen every single month and are the same amount every month. This can include your mortgage or rent, probably your phone bill, cable/internet, and car payment or other loans. Make a list of these!
Variable expenses happen every month but the exact amount may be different. Make a list of these expenses first. These can include tithing (giving), electricity, heating, gas, groceries, dining out, entertainment, child care costs, insurance payments, trash companies etc. Make sure to think about things like the water and sewer that may come quarterly.
After you have your list, try to estimate how much you spend on each of these things every month. This may be hard if you’ve never thought about it before and that’s ok! Knowledge is power and this is all a process. Look through your bank statements for the last couple months and see what you can find.
I would challenge you to keep track of your spending for the next month and see what you are actually spending! Update the numbers you originally made if that is necessary. You can keep a little notebook in your purse, you can keep a running list on your phone, or you can use an app!!
If you are an app person, I really recommend using the EveryDollar app to get started. You can enter all the categories we talked about before and the amounts you estimated you use. Every time you make money or have an expense just enter it in the app and it will track it for you! At the end of the month you can see what you actually spend vs what you expected.
I personally have used the app YNAB (You Need A Budget) for years and love being able to import my accounts so it automatically tracks for me. There is a free trial and then it is a paid app.
Are you a paper person? Here is a free printable that you can fill out to help you with this:
Other categories to think about:
You want to make sure you have a category for savings if that is one of your goals. Dave Ramsey recommends having $1000 saved for emergencies immediately. Almost half of Americans don’t have this in savings.
Things like clothing, car repairs and maintenance, home repairs, and vacations are all things that can be planned for. At some point you may want to set aside a certain amount of money each month to go towards those bigger expenses that come up throughout the year.
What is the goal with making a budget?
The goal in budgeting is that your expenses and your income would equal zero. You want to be in charge of where every single dollar that comes in goes out! This makes it so you can save for the future, for your children, and meet your financial goals!
What other questions do you have about making a budget?
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