A budget has the power to change your financial life. In fact, budgeting was the reason why we were able to pay off $87,000 of student loans in 2.5 years! Which is why I believe that everyone should have a budget.
Maybe you’re ready to take the plunge and begin budgeting, but you don’t know where to start. I totally understand that. Starting a budget for the first time can feel overwhelming! But a budget doesn’t need to be complex. You can make it really easy. And soon enough, you’ll be rocking that budget.
Here are easy steps that you can take to begin mastering your budget to win with money!
1. Look At Income & Expenses For Previous Months
The first thing you’ll want to do when you start a budget is sit down and look at where your money is coming and going. If you don’t already have a budget or have been tracking your expenses, you might not have a clue where you’re actually spending your money.
So take time to pull up the last couple months of bank statements to see your spending habits. Group your expenses into categories to see where you’ve been spending your money and identify spending trends. You may be surprised to see where you’ve been spending!
To do this, you can use an app like mint or you can do it yourself with a pen and paper or excel. I love using mint for calculating my net worth, but I’ve found that their categorizing feature isn’t the most reliable. My favorite method is excel, but I am also an accounting nerd. 🙂
Then take a look at your income. Take out your pay stubs to make sure that you’re getting paid what you should be and that your withholdings are correct. Once, Jacob received a raise at a pervious job, and he didn’t check his pay stub for a few months and when he did, he noticed that they never paid him for his raise! This is a mistake that happened once and we will never do again.
2. Write Down Your Financial Goals
It’s so important to have goals for your finances! And the purpose of a budget is to tell your money where to go. So before you start putting together your budget, make sure you know what you’re working towards. Then let your budget reflect the financial goals you’ve set for yourself.
If you’re single, then you will come up with goals for just you. But if you’re married, it’s important that you and your spouse sit down together to come up with joint financial goals. Talk through what you both want to achieve in your finances and dream about your financial future. Are you trying to pay off debt? Maybe save for an emergency fund? Whatever it is, write it down so you know what you’re working towards with your budget.
3. Decide On A Budgeting Platform
Before you begin putting your budget together, decide on the budgeting platform you’d like to use. You can use an app like Every Dollar, paper and pencil, or my favorite, excel!
By the way, you can get my excel budget template as an instant download from my Etsy shop for $5 here!
It honestly doesn’t matter much of what method you choose. As long as you choose a method that will work best for you! The one that you find easiest and will keep you motivated to continue with budgeting!
4. Come Up With A Zero-Based Budget
Now it’s time to get to the fun part! Creating your zero-based budget.
A zero-based budget is pretty simple. It just means that your budget should balance to zero at the end. Meaning that all your income should equal all of your expenses. Thus, you are assigning every dollar somewhere at the beginning of the month. Whether that is to normal household expenses like food, rent and utilities, savings items like an emergency fund, or even paying off debt! Every dollar you bring in during the month should be told where to go before the month even begins.
Sit down with your preferred method of budgeting, and the expense tracking you did earlier to come up with a budget for this month. You can use your expense tracking as a guide to determine how much you should be spending in each category. Then you can tweek it a little bit to make sure that you’re working on your financial goals. For example, if you noticed that you usually spend a lot of money on eating out, this is your opportunity to hold yourself accountable with a budget to lower that category and add more to your goals!
5. Make Adjustments To Get To Zero
The point of a zero-based budget is to get to zero! So this is your time to make the adjustments necessary to get there. Maybe you’ve added everything to your budget but your total money out is $100 more than your money in. This means that something needs to be cut! But if you end up with more income than expenses at the end of your budget, then you get to decide where you want it to go. Extra money to the emergency fund? Nice!
Do whatever you need to do to adjust your budget and get it to a zero-balance at the end.
6. Check In On Your Budget
Putting a budget together is just the beginning of budgeting. Many people will create a budget and then let it sit there… Thinking they need to check in on it at the end of the month. But that’s not true!
A very important part of the budgeting process is checking in on your budget to evaluate how you’re doing mid-month. I like to check in with my budget once a week every Sunday evening. On Sundays, I pull up my excel budget as well as my bank statements and enter my spending transactions into my budget. This way my budget to actuals are updated each week and I can make changes if I need to.
So be sure to check in with your budget each week and re-evaluate your budget. The great thing about budgeting is that it’s not set in stone. If you’re half way through the month, and check in with your budget to notice that you’re high on groceries, feel free to make changes. Maybe you’ll have to increase the grocery budget and lower the entertainment category. Make the necessary changes throughout the month to help you to succeed with your budget! If you get a hiccup in your budget in the middle of the month, don’t just through the budget out the window! Make the adjustments you need to still succeed.
Budgeting Encouragement
If you’re new to budgeting, it can be hard to get in the habit! But it is totally worth it. If you start your first budgeting month and it doesn’t go exactly to plan, don’t worry!! Budgeting can take a little bit of time to get in the habit. In fact, it usually takes 3 months for someone to get in the habit of budgeting! So if your first month doesn’t go to plan, try again! Take what you learned and apply it to the next month!
You CAN budget! You CAN win with money! It just takes some effort and some practice and you’ll be there soon.