Creating a Budget

Creating a budget really doesn’t have to be complicated. It is meant to help you know where your money is going and have a better understanding of your true financial picture. If you have a significant other it is best to create this budget together so that you both are on the same page. There are many many tips out in the world on how to create a budget. It just goes to show you how we all manage money differently. I truly hope you find my system works for you!

Gather Your Bills

1.) First of all, gather all your bills. You may have some online or paper statements but either way at the moment we are only focusing on amounts and due dates. Make a list in order of dates due. Take your time and make sure you have everything. I find it helpful to look at my previous month bank statement to make sure I am not missing anything.

Grab a Calendar

2.) Secondly, grab a calendar! Start with the month that you would like to implement your new budget. Write on the calendar the days you get paid and the days that bills are due. Looking at the day that your bills are due and the days that you get paid- determine which bills are paid on which pay dates. Make a list of the bills you are paying by pay date and the amount due. REMEMBER-If there are bills due before you get paid again they need to go on the previous pay date budget.

Side Note: I create my budget set on exact amounts. Instead of guessing what my utility bill may be I pay $200 a month every month regardless. This tends to only work if you start in a summer month without having a prior balance. In the summer, it means I have a credit and in the winter the credit helps cover a larger bill. Many companies will set this up for you if you call and ask about budget billing. 

Spending Habits

3.) Examine your spending habits. Go to your bank account and write down what you’re spending your money on besides your normal bills. For example a cup of coffee $5.00, movie ticket $11. Looking back at six months worth of spending is the best way to find out the average money you’re spending each month. After you have made your list of extras you have two options. Option one: you can use this amount to determine how much spending money you want to add to your budget. Option two: you can use this information to look at areas where you can cut back. Either way, you will want to add the amount of spending money into your budget.

Evalutaion

4.) Time to subtract your expenses from your income. For each payday subtract the amount of expenses from your income. If you have a positive number at the end that is great! You need to evaluate where it’s best to put that money. If you do not have anything in your savings that needs to be the first place it goes.

However, if you have a negative number look to see if there are things you can move around to different days or think of ways that you can bring in some extra money to cover that negative amount. As a result, this would also be where you would evaluate any spending habits and see if there are areas that could be cut.

Plan Ahead

5.) Most importantly, plan for the unknown. It is easy to overlook things that don’t come out in the form of a regular bill, such as tires on your car or that surprise wedding invitation. You may have heard of sinking funds. This is where people put away extra money just for these unexpected expenses. For myself, I have a separate account for my sinking funds so that they do not get mixed up with other funds or spent by mistake. Read more about sinking fund on my blog post here.

Create a Budget with Common Budget Categories

Mortgage/Rent

Utilities

Car Payment

Car Insurance

Insurance

Phone

Grocery

Gas

Loans

Credit Cards

Cable/Internet

Savings

Giving

You Got This!

You can take it a step further in creating a budget and put your numbers in an excel sheet to help with the math. Here is a basic budget to get you started. Just replace the numbers with your own and the formulas will do the rest. Share with me what tips or systems work for you!