Creating a Budget
One of my favorite things to do is budgeting. No joke. My husband has to remind me to put the spreadsheet away because I love analyzing our expenses, and figuring out how much we need to spend to be able to put more to our loans. Here are some tips and tricks of how you can get your budget started!
Get out that spreadsheet
Open up Excel (or Google docs works too) and list out all income and expenses you have for a month. Yours might look something like this:
P.S. If spreadsheets scare you and make you sweat, I recommend downloading the EveryDollar app from the app store. It basically does this for you without the spreadsheet. 🙂
Quick Tip: If you get paid every other week rather than twice a month, budget as if you only get paid twice a month. Two months of the year you will get paid 3 times a month, which will feel like a nice bonus that you can put to something fun, or use to continue to tackle those debts.
Now that you have your categories listed out, go ahead an assign amounts to each. Monthly expenses that are the same each month will be easy (an insurance or internet payment for example), but you’ll have to estimate amounts for other things like food and transportation for the month. But here’s the trick: Everything should equal zero. This means that your income should equal your expenses and every dollar has a place. Remember, if you’re working on paying off loans quickly, you’re going to want to budget for your needs, not your wants. Give yourself enough to each category so that you can obviously live, but try and tighten your budget so that it will still push you. Here’s an example of amounts for each category. I used a sum formula at the end to show that it all equals zero!
Now some of these categories may be higher or lower for you and that’s okay. If you’re working on saving for your emergency fund, put more to savings! But remember that this means something has to be deducted to equal zero at the end. Maybe you don’t have any debts and have more income to spend on other things. Feel free to include a clothing budget, a vacation saving budget, or whatever else you may need!
Keep track of monthly expenses
In my spreadsheet, I like to keep track of all of what I spend during the month. I am someone who would rather use a debit card than cash, so I look at my bank statement and transfer the charges to my spreadsheet. I enter the date, category, and amount for everything I spend money on. I also create an “actual” column next to the budget column to compare what I’ve spent to what I’ve budgeted. It looks something like this as I go through the month:
What if it doesn’t balance to zero?
So what happens at the end of the month and my actual column doesn’t balance to zero? Hopefully it’s because I spent less than what I brought home. 🙂 I like to try to make all my expenses very small so I can put the remainder to loans, so if I have extra at the end, I’ll add it there! If you don’t have debts, this may be your fun money, or more for you to add to savings!
If your expenses are more than your income, then that’s a problem. You never want to spend more than you make. You’re going to have to adjust your budget and take away things that you don’t need to make all your payments for the month.
Budgeting takes time
The biggest thing to remember is that budgeting takes time! It’s not something that will be perfect right away. It will take time for you to get estimations right on things like food for the month, and it will also take time for you to learn how to live and spend within your budget. Don’t give up. It will take about 3 months to get this right. A budget may feel constricting, but I really see it as a way to give you financial freedom.