I’ll walk you through how to create your budget, and also a free printable to get you started today!
Budgeting and money management is one of the MOST important skills we need to learn as working adults, an unfortunately it’s not one you learn in school unless you major in it. It’s easy to think that making more money is always the answer. But most of us are already maxing out how many hours we can work, and even then, it can sometimes feel like you never get to really enjoy your paychecks and the fruit of your labor.
A budget is one of the KEY tools to be able to put money in your savings, or pay off your debt. I know it can be time consuming sometimes, but trust me, it makes all the difference. Once you establish a budget, here are some of your potential benefits:
- You begin to really see your money flow
- Pretty soon, you will start to make better money choices
- It will give you an idea of how much money you need to reach your goals
- Improving your money management will improve you finances
- Better finances will lead to better credit (something I mention in my next budgeting guide)
Actively budgeting + reasonable goals = more $$
Once I began my journey in learning how to budget, I saw results within the first few months. I’ll share with you the biggest eye openers for me once I started tracking my spending:
- I would spend over $600 a MONTH on eating out….not counting groceries
- There was a potential of up to $200 in savings
- I was using up to 60% of my money on random, impulsive purchases
Once we started our budget, we went from not having enough for savings, to paying off almost $5,000 in student debt. It was hard for me to know how much extra cash I had or needed without seeing the numbers. But if you are constantly updating and managing your budget, and you set reasonable goals, you can really see a difference in how you track your money. You will be able to see the flow in and out of your bank accounts, and you’ll be able to adjust and manage it to be able to have more breathing room, and not stress about whether you’ll be able to save some extra cash or not this month.
With practice, you’ll be well on your way to improve your way of life. Trust me, it can be that powerful.
This guide will cover the following:
- Step by step on how to track your money and expenses
- Tips on improving your budget skills
At the end of the guide, I’m offering you the following free printable: My year supply of a monthly budget sheets with a cover page that I myself use. You’ll get a PDF with 13 pages total. Each page tracks the following:
- Your debt in credit (cards/loans), and the monthly bills for each
- Monthly recurring bills (rent, utilities, etc)
- Totals (to calculate leftover $)
- Bill calendar tracker
Use this guide to help walk you through creating/managing your own budget. Don’t forget to grab your printable at the end!
Let’s show you how to create your own budget!
1. Start with your essentials list
The first step to budgeting is to calculate just how much you need to meet all of your basic needs. Now a days in this list you may include your phone bill, internet bill, and car payment.
One tip I always recommend for this list is to OVER estimate a little bit.
- For example: if your monthly phone bill is $122 a month, leave it at $130. It’s a really useful way to give yourself some cushion. Another good one is your rent. If your rent is $775, you can just round it to $800. Generally, don’t go over more than $10-$50 in overestimating though. Once you have your amounts set for this category, keep that number in mind.
Here’s a sample list of essentials:
- Rent ($1272 –> $1300)
- Food (home-cooked only) ($350/month)
- Utilities (electricity/water/gas) ($150/month)
- Car payment + insurance ($256 –> $260)
- Gas ($80/month)
- Phone bill ($125/month)
- Internet ($100/month)
Essentials TOTAL: $2,365/month
Once you have all your essential noted, and you have a total, we can move on to our second list.
2. Debt list
Now let’s take a look at how much you owe other institutions. This is different from your essentials because it mainly comes from loans/credit cards.
If possible, keep a list of the TOTAL amount of money you owe. This list can come in handy when you’re trying to set goals.
For the purpose of your budget, just write up a list of you monthly debt amounts (so how much you pay in bills, not the total amount you owe).
Example Debt list:
- Card 1: $30/month
- Card 2: $25/month
- Student Loan: $100/month
- Card 3: $45/month
- Card 4: $75/month
Debt TOTAL: $275/month
3. “Other” List
I like to keep an “other list”, in which I like to account for other things that I tend to spend on during the month, which could vary for you. This list is more for stuff you can always be flexible with, and change based on how often you do it. Things like going out, eating out, movies, etc.
You may be thinking that you don’t want to do this list, but it is where the most money gets lost and unaccounted for. If you
re not sure how much you’re spending on shopping and other categories, you can use tools to help you. I used both my banks “trends” tool, as well as the Mint app to get me started, but I quickly learned how to do the rest myself.
- Entertainment: $300/month
- Eating out: $100/month
- Monthly subscriptions: $28 –> $30
Other TOTAL: $430/month
4. Calculate your total expenses
Add up your lists so far. This is how much you spend per month (year), or your “expenses”.
In our example, my combined total would be:
Essential + Debt + Other = $2365 + $275 + $430
Combined TOTAL= $3070/month.
*Optional bonus step: Turn this into annual calculation as well, to give you a bigger picture, and something you can compare to your annual income. This number comes in handy when applying for credit/loans. In this case, the Combined TOTAL: $36,840 annual spent
5. Calculate your income
So now that you know how much you spend, you can start thinking about how much you make, or how much you should make to cover all of your expenses, including the splurging ones.
*Another note I will also add here is that you should underestimate a little bit. For example, if last year you made $22,359, just keep it at $22,000. I’ll explain this in more detail later.
- In our example, let’s says we have a family of 2 adults, who both work. Their average income has been about $22,000 and $20,000 (underestimated) over the last few years. This turns into about a combined 3,500 a month.
TOTAL INCOME: $3,500/month ($42,000 annual income)
Here’s the real brainteaser part. Let’s analyze your numbers to get a better understanding on your money flow.
In our example, based on our lists, we have a monthly $3070 SPENT vs. $3500 INCOME.
Check for one of the following scenarios:
- If your annual SPENT is greater than your annual INCOME: You need to adjust your budget. The easiest place to start is by increasing your income. Whether that means side hustles, a second job, or any other way to supplement your income. The second step would be to adjust your monthly spent list. Look for places you can cut or reduce amounts.
- Are your two numbers about EQUAL? If the difference in your amounts is less than $100-150, you also might need to think about how to lower your expenses, and increase your income. Even though you may have some money left over, it’s not enough for emergencies that will more than likely come up. You also won’t have much left over if you’re trying to save money for something big (like a house, car, or wedding).
- The best scenario you want to be in is to have a few hundred more in income ($200-300+). This gives you cushion for emergencies, and sets you up to save money over the course of the year.
Our example numbers show a $430 extra income, which comes out to a little over $5000 in a year. That’s great for nice vacay!
Hopefully these steps were easy enough to follow, and now you can start to track your monthly flow of money, which can help you set reasonable goals.
*Why did you over/under estimate?
Let’s talk about my under/over estimation. So I told you to overestimate your spending, and underestimate your income. Why? Well I told you it gives you cushion. More specifically, if you actually spend less, and make more, you’ll find yourself nicely surprised with an extra bonus every month or at the end of the year when you compare your SPENT vs. INCOME.
Plus, throughout the months/year we tend to spend money out of the blue, and things like sick days and family emergencies can take a way from our income, which is never a bad thing to try to account for with this method.
So there you have it. Budgeting in 6 easy steps.
Additionally, here’s some tips:
- Check in with your budget bi-weekly/monthly: Make sure you’re on track with your budgets. Are your spending more in this month? In what areas? Can you reduce it, or do you have to adjust for it?
- Try to account for everything: Don’t just budget your responsibilities and not add in fun, because that’s not helping anyone. Just because the $150 you spent last Friday at the bars and club wasn’t on any bills, doesn’t mean you didn’t spend it. Give yourself a set amount to spend on “entertainment” instead, to account for these outings.
- Do calculations and keep track of your bank statements: Check your bank account every couple of days. Make sure your spending is right about where it should be. It’s a good habit to keep. Fraud can happen to anyone.
- Leftover money should always be used as cushion or emergency funds, or savings: I always like to have at least $100 in my bank account at all times just in case anything happens. If I ever have some left over that’s over $100 and I know I’m not spending until next paycheck, I’ll then put it in an emergency or savings fund. It’s the best practice to accumulate some extra $.
- SELF-DISCIPLINE: If you want to lose weight, you have to commit to the healthier lifestyle. If you want to save, you have to commit to the budget. Remember your goals. It’s ok to splurge a little on yourself every once in a while, but not every time you have extra money.
Ready for the next step? Continue onto my next budgeting guide, which will help you improve your credit.
Please share our post to help other get their budgets started! As promised! Here’s you freebie (click to download).
Looking for an EXCEL version of this printable? Check it out on our printable Etsy store PersonalPrintable!
***Kind reminder that this is for PERSONAL USE ONLY. By downloading the printable you agree not to use for any kind of profit. All designs are copyright or Vitadirose.com and PersonalPrintable.
Any other budgeting tips you have to share? Let me know in the comments!