The New Year has arrived and there is no time like the present to start getting your budget in order! And do you know which tool will get your financial life in order? It’s the budget! I’m not exaggerating either. A budget is hands down the best way to tracking your spending habits and a great start to financial independence.
How to Create and Follow a Budget in 5 Easy Steps
If you ready to make a difference in your finances and your life in general, it’s time to create a budget! You can create budgets for any time period (weekly, monthly, yearly), but I have found that the easiest way to get started is by creating a weekly budget planner and going for it!
If you are ready to begin and wondering where to start, here are some tips on how to create a weekly budget planner:
Start with your income? Unless you are a salaried employee, you may not be calculating how much you make corrections. Many people think “I make XX per week – that times 4 is my monthly income” Actually, there are 4.3 weeks per month. The best way to calculate your actual pay is to take your weekly amount, multiply it by 52, then divide it by 12. That gives you an accurate representation of your income.
Calculate your bills. Look at your bank records for the last few months to determine how much you spend on average on the household bills. While mortgage/rent, association fees remain the same for long periods of time, utility bills might vary greatly. When I first started working on my budget, I pulled last twelve months amounts to come up with an average dollar figure for my budget.
Add your ongoing expenses. Take your last several months bank statements and calculate how much you have spent on groceries and household necessities. Take an average of these amounts and you have your monthly household expense amount. It helps to be as detailed as possible when categorizing your expenses, but don’t overcomplicate things. My expense categories include things like food, gas, clothes, car, eating out. Things like Starbucks, vending machine, makeup don’t need their own categories (unless you are trying to prove a point) – I include them all into “OTHER” category. Don’t be afraid of the numbers you will see in some of these categories – it is a starting point and the beginning of your new financially responsible life.
Keep a record. While the apps might be nice to keep you in check, I find it a lot easier to review my financial records on the computer. Once a week a set the time aside to review my finances. I see if I have to take it easy in some categories, completely stop spendings in others or maybe live a little because the budget allows for it. Will the budget make you a perfect spender? Probably not, but once you develop a habit of keeping track of your money you will for sure become a conscious spender.
Budgeting might not be as fun as spending money, but if you have a credit card debt (and the statistics show that an average American family carries 8,000 – 10000 credit card debt), it is time to start your road to financial independence. It won’t be easy, but it is a lot more fun spending money you have in the pocket rather than charging it to a credit card and not knowing if you can pay the bill at the end of the month.
What can you cut? Get in a habit of reviewing your records weekly. After you have a few weeks to compare, take some time to analyze your findings and see where you lose money (eating out, snack food runs, and other unnecessary expenses). Can you skip daily coffee shop stops? Can you avoid trips to the vending machines at work and bring a snack from home? Can you get a pizza from a store or make one yourself instead of ordering a delivery? Once you see it on the paper (or in a spreadsheet) it will be easier to spot the repeat offenders that suck money out of your pocket
Here is the Google Sheet I created and have used for a while. Feel free to save yourself a copy!
It’s time to get real with our finances my friends! Are you ready?
More Frugal Tips:
Making Grocery Shopping a Frugal Adventure
10 Fun Cardboard Box Projects for Kids
20 Kids Finance Books You Should Read
Piggy Banks for Kids that Encourage them to Save
Games that Teach Kids About Money
