Starting a budget
Do you feel like you don’t make much money as it is? Living paycheck to paycheck? Feel like you have nothing to manage so what’s the point? That’s all the more reason to create a budget!! Budgets aren’t fun and they can be depressing but also rewarding, helping you make smarter money decisions.
You’ve decided to start a budget and manage your money monthly to better equip your finances for the future. But where do you start? What items go into a budget? ALL OF THEM! Any money you spend or want to spend, goes into your budget. The first step is deciding to start and the next step is to start writing your expenses down. First, write down your monthly income. What do your paychecks, social security, alimony, child support, etc. total? Grab a piece of paper and write that down at the top. Now comes the more tricky part, expenses. Once you write down the staples, the bills you need to pay every month, you’ll need to move on to your extra circulars.
I am NOT a master budgeter. I am a master of spending money, money I don’t have. I do a budget every month but I don’t always stick to it. I am getting better at it. I’m human, I make impulse buys and compulsive decisions that affect my budget in a negative way. Making a budget doesn’t mean you’re going to be financially smarter, it doesn’t mean that all of a sudden all of your money is going to go where it should or where you want it to. Bills tend to pop up out of nowhere, things you weren’t even thinking about are in your face when you go grocery shopping or out running errands. Lunch in the middle of the day when you weren’t planning on eating out. Good news is, you can plan for that!
Staple expenses, think of what you absolutely have to pay every month. Luxury expenses, think of what you enjoy in your life but don’t need. Necessities, things you need to continue life, i.e. groceries, gas, etc. Miscellaneous/Fun, money spent on activities that aren’t included in the other three. You might have more than this but this is somewhere to start and get those juices flowing to think of what you pay monthly:
Rent/Mortgage
Homeowners/Renters Insurance
Car Insurance
Power/Energy/Gas
Car Payment
Sewer/Water/Trash
Child Care (private, public, before/after school program)
HOA dues
Alimony/Child Support
Credit Card(s)/Personal Loan
Savings account (no matter how little you put in it, it matters that you’re putting something in it)
Home warranty
Cable/Satellite – what do you pay for to watch TV?
Internet – do you stream? What services do you pay for?
Birthdays - depending on whose birthday it is and what it is you have to plan. Are you throwing the party? At home or somewhere else? How do you gift? Is it someone you can get away with something small for? Even if it is your best friend, parent, loved one, etc., if you can’t afford the expensive gift or something out of your budget, don’t put yourself in an overspending situation just to buy it. Simple gifts are some of the best gifts. One year for Christmas I was given a diamond necklace, I’m not a huge jewelry person, but it was a nice gesture and I was thankful, the next gift I opened was a crockpot and I was WAY more excited about that. Are you crafty? Is making something an option? I’ve made pillows for presents and they’re always a hit.
Holidays (Valentine’s Day, St. Patrick’s Day, Halloween, Thanksgiving, Kwanza, Ramadan, Christmas), which ones do you celebrate and how? Are you against V-Day and celebrate the opposite? Are you like me and shop the day after for the half priced candies? Is green beer, corned beef and cabbage and family in your celebration for St. Patrick’s Day or do you just head to the bar? Halloween brings costumes, especially if you have kids. Also, the candy you’re handing out to trick-or-treaters. I get that that is probably a silly thing to include in your budget but it’s Halloween as a whole. Then of course all of the activities and gifts the last two months of the year. Thanksgiving and Christmas are a full two months of activities and get-togethers. Do you travel? And THEN it goes into New Years’ eve, it would be smart to start saving in July if not sooner.
School Activities – sports, marching band, school trips
Leagues – outside school sports, adult leagues, i.e. bowling, tennis, softball, etc. I was talking to a friend of mine about her son that is a heavy lifter, he was invited to the world championship and the flights were 1500$ per person! The trip doesn’t just include flights but also where are you going to stay and how will you get around, don’t forget about eating.
Back to School – everything that goes into getting kids ready for back to school. Clothes, shoes, school supplies.
Spring Break/Summer/Winter Break activities/child care – how you are going to keep your kids busy during this time.
Travel/Vacation – When are you going? Depending on how far out your trip is or how much it will be, start saving well in advance, six months to a year. A little saved every month adds up instead of using a large chunk of income and stressing out your financial peace. What expenses are your responsibility? Plan for a little extra spending funds. When you plan to go over, it’s not a surprise to your budget later. Even if you aren’t actually planning something, still might be a good idea to have that little cushion in case something unexpected comes up that you need travel for a weekend or a week.
Extra circulars – Like school, life is full of fun things to do that cost you extra money. During the summers I like to go paddle boarding and take my kids to the lake but there are fees, I have the option of paying each visit or getting an annual pass, which is the best deal because going twice, makes up for the annual pass cost. Do you like to Redbox and relax or go to the movies? Happy hour after work? Do you have a hobby that costs extra? Family camping every year? Fishing? Surfing? Skiing/Snowboarding? What do you do that helps you enjoy life?
Category Key - Put each item on your budget in a category and track what you’re spending in each month. Examples: D - debt, G - groceries, K - kids, etc. Whatever works for you.
TIP: Don’t write anything down yet! Save all of your receipts for a month, paper ones. Every single one, no matter how small the amount is. Do payments automatically come out of your account every month? Print them or go through your statement and write them down. At the end of the month, write them all down and tally them up. That will tell you where your money is going and help you create your budget for the coming month and the month after that and so on. Actually seeing where and what you spend your money on will help you cut back and be more conscious of your budget.
Here is a simple budget sheet to get you started. There are also plenty of apps to download to help you keep track of your spending. Instead of saving paper receipts you can enter your expenses and it will calculate it out of your income immediately and show you if you are on track or not and where you might need to adjust your spending.