It’s already November! Today’s to do list should include tackling that budget.
Are you creating a new monthly budget or refreshing your current budget? We have some quick steps for making sure your monthly budget has a solid foundation.
Before we get started, let’s look at what a budget is and why you should have one.
A budget is an estimate of income and expenses for a set period of time.
So, why should you have one? Do you ever get to the middle of the month and realize that you spent all of your money on fast food and fun, but you still have bills due? By doing some simple budgeting, you can make sure you that you have your bills paid first. With budgeting, you will know exactly how much you can spend on things like fast food and fun.
Let’s get started.
Step 1. Decide how often to budget.
We all get paid differently. Some get paid weekly, while others get paid bi-weekly or monthly. If you work for yourself, you may even get paid daily. Find a budget method that works for you and your income. I budget bi-weekly, but have an overall view of the month. Don’t forget to budget ahead of the next month.
Step 2. Write it down.
Start with your income. This one can be hard depending on how you get paid. If your pay is not guaranteed or consistent, start with the minimum that you may get. Make a line for your estimated pay and your actual pay. Budget based on your estimated pay first and then adjust. It is always a win to have extra at the end of the month.
Next, write down your expenses. I keep a list of all expenses in my planner. Each month I break down those expenses into each pay period with estimates. You may not know the actual bill amount for bills like utility bills, so I look at my bills from the previous year and estimate them. List your expenses in order of importance, starting with necessities and ending with wants. List your bills first, then your savings and debt repayments. Afterward should come your needs and then your wants. Here are some examples.
Bills: Mortgage, Rent, Utilities, Auto Payment, Insurance
Savings: Emergency Fund, College, Kids, House Renovations
Debt Payments: Student Loans, Auto Loan, Credit Cards
Needs: Groceries, Gas, Household Items
Wants: Fast Food, Movies, Shopping
**Pro Tip: Get to a point where you are paying next month’s bills with your previous month’s income. You will always be ahead in case of an emergency.
Step 3: Decide how you will keep track of your budget.
There are so many options for this step. There are tons of budgeting apps and websites available. You could also use an Excel spreadsheet or just a notebook. To get started, I suggest starting simple. Grab a notebook or piece of paper and write everything down. After you get your budget down on paper, then you can look for your favorite budgeting app or method that works for you.
Step 4: Don’t forget an annual budget.
Who has forgotten about that car registration or property taxes? Every January, I list out my periodic or one-time expenses. Property tax, car registration, pest control, home warranty- just to name a few. Make sure you know what expenses you will have for the year and budget for these items.
Last thing- Know that your budget now doesn’t have to be your forever budget, especially if you are just now getting started. Income and expenses change, so be flexible with your budget if you need to.