Having a budget does not have to be complex or intimidating. You can create any kind of budget you want: easy, technical, eye-appealing—the sky is the limit.
The only criteria for a budget is it has to be functional.
Personally, I don’t have the “bullet-journaling touch” so my budgets always end up simple. But I like simple. My husband, on the other hand, likes his technical. He has an extensive budget and it works great for him.
But whatever your style, you may need to try a few things to see which you like better and which style works for you and your life.
In the meantime, we are going to go through what steps I use to create a simple budget and from there you can craft yours to fit your needs and personal style.
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1. Figure out your net income per month.
This is what you take home after taxes, Social Security, etc. have been taken out. This is the amount you will work with in your budget.
2. List your fixed expenses in your budget.
This would be your rent, utilities, car payments, etc., anything that does not fluctuate each month or whichever payments you make that are not easily changed.
3. List your variable expenses next.
Variables would include your food, clothing, gas, etc.
These are expenses that fluctuate each month and are the easiest to cut back on when you are working on saving money.
4. Assign an amount to each.
Fixed expenses are easy to assign an amount to whereas variables are a bit trickier.
But knowing how much you make each month plus how much your fixed expenses are leaves you with the amount you have to work with for your variable income.
5. Consider each expense.
If you find there is just not enough left over after you have allocated money to your expenses, you may need to cut back.
(You can read how in my article Personal Budgeting Tips for Moms.)
You may find there are areas you can cut back on or things you can eliminate. (Cable, extra car, cell phone plans.)
6. Divvy up remaining money into savings, spending, etc.
When I was in college, one of my professors taught me how to use an envelope system for saving and spending. I was paying for college and my wedding so it could not have come too soon and I found that I preferred it to any other method I had been using so far.
Basically, I took envelopes and designated them for various expenditures (invitations, favors, dress, etc.). I wrote the name of each expense on a separate envelope and how much I designated for that expense. Once I bought said items, if there was anything left over, I added it to one of the other envelopes.
This created a snowball effect and a good chunk of “extra” money I could use elsewhere as needs arose. This was a nice system for me because I handled the money myself, saw where everything went and enjoyed seeing how much I had leftover due to my savings strategies.
If you like the envelope system but prefer not to deal with cash, Mvelopes has been a great program for both my husband and I. It uses the same system but it’s digital which allows me to keep my budget with me wherever I go. Which is very convenient!
7. If you get paid bi-weekly or weekly
You can budget your paychecks one of two ways:
- You can allocate payment of certain bills to a certain check. Ie. The first paycheck of the month covers utilities while the second paycheck covers everything else.
- You can take each bill and divide it by the number of checks you get a month and pay that amount towards each budgeted item each pay period. Ie. If I’m paid weekly and one of my budgeted expenses is $20 a month, I would put $5 towards that fund each week.
8. Having a budget is important if you ever want to save money or not over-spend.
Too many people end up with very little at the end of each paycheck because they do not SEE where their money is going and just how much they are spending on non-important items like eating out, etc.
Whatever you use, having a budget is a great way to keep from going into debt. If you try to do it all in your head, you are going to get yourself into trouble financially. So, take the time to create a simple budget, keep to that budget and enjoy the freedom it can provide you.