I want to start a budget, but I don’t know how
Starting a budget can change your life. Seriously! I have been consistently budgeting for about three years, and it truly has changed my life and my finances. If you have financial goals but feel like they are so far away or unattainable because of credit card debt, student loans, a low income, or any other combination of factors, then I believe that creating a budget is a great place to start managing your finances. Now, a budget isn’t a magic button that erases all of your debt or turns straw into gold, but it is a tool to plan where your money goes. I love to budget because it allows me to be in charge of my money and tell it where to go, instead of me standing there sadly watching my money disappear. If you are like most people I know, it feels better and more comfortable to be in control of your situation. So, let’s get started and learn how to tell your money where to go, every last penny.
Make a list of all sources of income in a month. You can use pen and paper or a spreadsheet, it really doesn’t matter. The important thing is that you are taking action steps. Once you have your list with the actual dollar amounts, add them up. You now know exactly how much money you make in one month. This is a much easier task if you have a consistent income each month. If your income fluctuates, it might be better to take an average.
Make a list of all of your bills and expenses. If it helps, you can create different categories for your bills, for example, debt, fixed expenses, variable expenses, utilities, etc. This part may take a little more time to gather information from all of your accounts, but it is important to be exact and look up the actual dollar amount just like you did for your income. Remember to include any money contributed to savings, tithes, retirement accounts, or investments in your list of expenses. The more exact you are, the clearer the picture you have of your finances, and the more control you have over where your money goes.
Now that you have both your income and expenses, subtract your expenses from your income. This is your net income and tells you if you are earning money or losing money each month. Now don’t panic or celebrate just yet! If you are losing money each month, that is okay! That’s why you are creating a budget, so you can plan out where and how you spend your money. If you are earning money, that is great! Your next steps can be analyzing how you can best utilize the surplus to work for you.
That’s it! Those are the three basic steps to get your budget started! If you are not sure how much you spend in a given month, you can start that right now! Start tracking all of your expenses for the next month. Save receipts and check your online transactions to compile all of your expenses for the month. When you are gathering this information, don’t change your spending habits. Spend as you normally would to give yourself an accurate picture of your expenses. Now go out and get your budget started! I am excited to hear how it goes!