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Let’s Create a Budget That Actually Works
Helllloooo ladies! Have you ever reached the end of the month and wondered where all your money went? Well, you’re not alone. While you could spend months trying to cut back in random areas, the quickest way to get to the bottom of it is to create a budget. I know, I know, budgeting seems like a time-intensive, restrictive pain in the butt. But guess what – it works. Here are some simple steps you can take today to get a budget implemented and working for you..
1. Goals
I’ve always been a big “goal” person. Whether that’s you or not, picking some goals can be vital when creating and sticking to a budget. It doesn’t even have to be a goal related to your retirement or your future child either, it could be a goal of purchasing a new car or taking a tropical vacation. Regardless of what the goal is, you need money to make it happen, and to have money, you need to know how much money you need and you need how to get that money set-aside. I think pinpointing your goals is a great place to start when creating your budget because it turns a daunting task into a fun exercise, where you aren’t just creating a budget to create a budget; you’re creating it with a purpose.
2. Lay it all out
It’s time to dive into the numbers. I recommend doing this on an Excel Spreadsheet. It doesn’t need to be pretty, it just needs to be comprehensive.
- List all your sources of income. This includes your salary, side gigs, passive income, etc.
- List every bill you pay throughout the month. List the source and the monthly payment. Pulling a recent couple of months of bank statements can be extremely helpful, as many of us forget what we are even paying! Ensure to include everything: rent, utility bills, phone bill, car insurance, streaming subscriptions, Spotify subscription, medication subscriptions, etc.
- List the other areas you spend money on each month and an estimate of what you pay. A budgeting/money app can be helpful for this, as it categorizes spending into categories. Most of us will have a minimum of the following areas: groceries, entertainment, restaurants, shopping and gas.
3. Categorize
Now that everything is in front of you, group each expense into a category. I recommend keeping it simple and grouping them into “necessary” and “non-necessary” categories. For example, groceries and utility bills would be under necessary, but an Amazon subscription and entertainment are non-necessary. Even just breaking it down into these simple categories will help you see what your hard, necessary monthly expenses are versus what you choose to spend on non-necessary items. Do a quick calculation against your income. I recommend deducting all your “necessary” expenses first, which will enable you to see how much money you have left over each month after these are taken out. This will help you see if you have been overspending on non-necessary items. You may realize that you have far less than you think, and this is when you will need to sit down and decide exactly how much you can spend on each “non-necessary” category.
4. Set Realistic Limits
Take a look at your total monthly income, your goals, and where you stand at the end of each month after all necessary items have been paid for. Assign a spending limit to each “non-necessary” category. Make sure you are being realistic. If you absolutely LOVE the foodie scene in your city, don’t cut your restaurant budget in half overnight. Making gradual changes will help you stick with your budget and reach your goals.
5. Prioritize Savings
When creating a budget, one critical consideration is savings. Make sure to include this when allocating your monthly income. Determine a percentage or $ amount of your income that you want to save each month (or paycheck) and treat it like a fixed expense. Don’t get ahead of yourself – this doesn’t need to be some outrageous amount each month. Even $50 per paycheck will get you in the habit of saving and set you up better down the road. I recommend setting up an automatic withdrawal into your savings account to ensure you stick with it.
6. Making Changes is Okay
Keep in mind that your budget is not set in stone. Things change, and your budget should be able to adapt to these changes. It is essential to review your budget regularly to update any monthly expenses and adjust any areas that need adjustment. Whether it is a raise or a rent increase, updating your budget will ensure you stay on track.
7. Don’t Forget to Reward Yourself
Let’s be honest: having a budget and trying to stick to it can sometimes feel a little suffocating. Especially if you love going out with friends, buying a fancy latte on your way to work, or simply just not paying attention to your money all the time. For me, it helps to set up little motivators along the way. For example, I kept my “restaurant” spending down by $50 for the last three months, so I decided to put $50 in savings and spend $100 on a new sweater I have been wanting. Might sound silly but trust me, it works!
8. Utilize the Tools Available
While I do think it is valuable to sit down and enter in all your income and expenses before trying an automated tool, there are SO many out there. Apps like Intuit, YNAB (You Need A Budget), or even your bank’s own budgeting tools can help to organize and automate some of this process for you. Just know that even apps make errors, so when using these apps, I often find myself having to edit the spending categories for much of my bank activity. I would recommend having your own spreadsheet, or even using an organized budget workbook like this one – these tools are simple and make it much easier to know what is going on!
9. IMPLEMENT
Start following it. There is no point in creating a budget if you aren’t going to use it. For me, this meant checking my spreadsheet every day to see where I stood. One technique that a friend used was withdrawing cash and creating an envelope for each category; when the envelope was empty, there was no more spending in that category for that month. Whatever works for you, do your best to stick with it.
I know that creating a budget can seem daunting, and honestly not the most fun. That being said, it really is necessary if you want to be in control of your finances. No more panic at the end of each month when you check your bank statement – time to take control and start working towards financial freedom. Let’s GO.
her money. her methods. 