Creating a budget shouldn’t be hard. It is empowering to know exactly where your money is going. With a few guidelines and a bit of work, you can create a budget for your household in no time!
I will admit though, that sticking to the budget is the hard part. There are no expectations that you should create a budget and then that month you will be a money savvy mama. Nope, that is unrealistic. In all reality, it will probably take you about 3 months to get this right. 3 months seem like a long time? Well, in the scope of your life ( 70-100 years) 3 months is nothing! Learn how to budget now so that the rest of your life can be less stressful, at least in the money department.
Bills, bills, and more bills
First things first, take out a piece of paper and write down all of your bills. This is not going to be perfect as you will probably forget a couple for right now. Write them down if you remember them later. Bills would be rent/mortgage, credit cards, utilities, student loans, personal loans, car payments, insurance, cable, etc. Be sure to write down who you make a payment to and the approximate amount of your monthly payment. If this is a debt (credit cards, loans, mortgage, etc) be sure to write down on the side the amount owed on each.
The “other” expenses
Now, write down all of the items that you spend money on on a regular basis. This can be clothing, groceries, pet supplies, lawn care, anything that is not a “bill”. Attach an approximate figure spent each month next to each item. This is a bit difficult and will need to be refined later. As you write these down, think about their importance from 1-10. You will need to go back and number them 1 being most important, 10 being least. If you have more items than 10, you will go above 10 of course. I hope this makes sense, but if not, see the example below.
Example: Groceries, clothing, pet supplies, lawn care, daycare, eating out, toiletries, nails, and gifts are all in the “others” category. I would label them 1-groceries, 2- toiletries, 3-daycare (if you are working and there is no other option for childcare), 4-pet supplies, 5-clothing, 6-gifts, 7-eating out, 8-nails, 9-lawn care.
Add it all up
Take each category and add it up. How much do you spend in just bills? How much do you spend in “other” expenses? Add those two figures together. Write your monthly income down and subtract your expenses from your income. Is there anything left? Great, we will come back to this. If there is nothing left or you are left with not enough money for the month, we need to go back to that priority list from your “other” expenses. You will need to knock off the least important items until you get to an even income and outgoing expenses.
If you still do not have enough money to cover your monthly expenses, you will need to cut out a bill. Do you have cable that you can cut? Internet? An expensive car? Something will have to give in order for you to break the cycle of debt. My next post will be just for you, so come back later this week.
If you have more than you need for each month, you will need to start paying off debt. No debt? Then you can start saving for your large emergency fund. I will be discussing this in post 3 of this 5 post series.
Track your expenses
Every month is going to bring new expenses or even new incomes. The absolute best way to plan for this is a budget so you can tell your money where it will go before you even get it. One thing that you will have to keep track of is your spending. This is a bit more of a learning curve than the budget itself, but it is the most important part I believe. If you don’t know where your money is going, how can you budget correctly? So, “how do I keep track of my spending”, you ask?
You will need a piece of paper and a pen. It is easiest to start at the beginning of the month, but you can get practice now. Each time you (or anyone in your household) spend money, it needs to be written down. You can do this every few days or daily if you would like. Once you really get the hang of it and your budget shows that you got it down, then you can do it once weekly. Bring all receipts together and look at your bank statement. Write down in order what you purchased and how much. I do this with even small, 0.67 purchases. Every purchase is important. You can categorize the purchases now. Example: instead of writing down “toilet paper- $7”, write “toiletries- $7”
Refine your budget
At the end of the month, you will add up each category so that you know EXACTLY how much you are spending in each category. Adjust your budget as needed for the next month.
When creating a budget, it doesn’t have to be pretty, it just has to get the job done. A notebook will do the trick for sure! The most important part is sticking to the budget once you have created it. If you are super interested in pretty budgets, you can look around the web OR you can purchase a personalized one from me (click to learn more). Stay on track with writing down all of your expenses each day and it will be a breeze. Create a budget that works for you and your family that helps you reach your goals.
Still need help? Check out my Budget Coaching options and sign up for a free 15 minute call to see if it is right for you!
*Pssst, this is the first of 5 posts in the “How to: Personal Budget” series.*