You hear everywhere how you need to start budgeting. Grab a pen, a piece of paper, and all those unopened bills and get to scribbling out a plan for your finances.
Or, hop on your phone and download a budgeting app. Something like EveryDollar or YNAB (You Need A Budget) are good for starters. Create a spreadsheet on excel. Get a fancy notebook. Buy up all of Walmart’s colorful pens and highlighters.
You get the idea.
Budgeting is important. And over time, it’s become…dare I say… a trend? A trend that’s really catching on and unlike any other trend it’s the most beneficial to your life. But I’m pretty sure you know it’s important just by you clicking on this article. So you probably just want to know what you need to create your first budget. So here’s what you need to have to start budgeting.
A piece of paper.
AND SOME WILLPOWER.
Now, let’s go ahead and set up your first budget. 🙂
One: Assess The Damage
The first thing you’ll want to do is gather up all of your expenses first. This is the easy part.
When you start budgeting, you’ll want to get the amounts for all of your bills, all of your debts (minimum payments), your daily living expenses like groceries, transportation costs, personal spending, etc. You’ll also want to make sure to write down those due dates as well.
Obviously, you can make this as detailed and complex as you want to. But for the purposes of being basic, that is really all you are going to need. Your overall budgeting style will develop the more you do it.
Two: Total The Income
And here is where it starts feeling like a… structure. Write down your income for the month. If you hold a 9-5 where you know you will get paid, use that income primarily since you know you will receive that (for the most part).
If your income is irregular, you’ll have to estimate what you plan to bring in. Writing your budget down will be most beneficial for you since you will know exactly what you have to bring in to cover your expenses.
Three: Time To MATH!
The make or break moment where you will find out if you are living above or below your means. Take your expenses and subtract them from your income.
(ex: income ($3500) – expenses ($3200) = savings/extra to debt ($300))
If doing this puts you at a negative, it’s time to either re-evaluate your expenses or figure out a way to bring in more income for the month. Continue to go back and re-evaluate your budget until it puts you into a positive for the month.
Considering whatever your financial goal is, you will want to use that leftover money for savings or paying down debt. You can either quickly cut down on your bills and variable expenses, OR you can work to increase your income to make that leftover after every budget bigger. But ultimately, that ending number will be up to you and the way you work your budget.
Four: Actually USE… IT. 😐
There is no point to start budgeting if you never look at it again. So make sure you use it consistently throughout the month. Interact with your budget by means of weekly check ins, expense tracking, mid-month check ins, etc.
Check in with your spending at least once a month to make sure you are on track. Best practice is at least once a week. The more you interact with your budget, the more you stay aware of your limits and stay focused on your goal.
Five: REPEAT. Every. Month.
Yes, do your budgeting MONTHLY. Although I know there are many individuals who budget by the year, by the half, and by the quarter, you will probably get the most benefit from your budgeting by doing it every month. In this way, you will have a better idea of your spending every month. You’ll be able to readjust your budget accordingly and your budgeting style will develop a lot quicker.
As stated in step four, the more interactive you are with your budget, the more focused you will be towards your goal.
So I advise you do a budget every month. If you prefer to do yearly, quarterly or biannually, then go for it!
Ultimately, you are still making a step in the right direction and all the best to you in reaching financial success!