Creating and sticking to a budget can be incredibly overwhelming if you don’t know where to start. Most of us are not 100% sure where our money goes every month and this is a problem if you have big financial goals. So to make budgeting a little less scary, I’ve broken down some simple steps that will help you get a handle on your personal finances and start
Get Real, Real Quick
You need to fully be aware of your financial situation if you’re going to budget effectively. That means really taking a look at where your money is going each month and what your current debts are. Sit down and do a complete audit of your monthly spending. That means actually looking at your bank account statements. Add up everything you spent money on and where it was going. Using different categories to figure out what could possibly be changed will be super helpful. Below is a list to help get you started:
- Eating Out
- Subscriptions (Spotify, Hulu, Netflix, Audible, etc.)
- Misc. Expenses
Decide on a Plan
Once you’ve taken the time to figure out where your money is going, then it’s time to decide where you want it to go moving forward. I recommend figuring out if your primary goal is debt payoff or saving. If you have large debts accruing lots of interest, you may want to focus on debt payoff (I’ll share more about this later this month). If you are debt free or your debts are minimal, then a savings focus budget is in order. The important thing is to be honest with yourself about where you need to focus your energy. Remember this is not a punishment and budgeting is helping you towards your financial goals.
I’m a pen and paper person which means I have a designated notebook that has our monthly and weekly budgets. If you’re an Excel guru, then create an electronic budget template. There are tons of apps and resources online but trust me when I say, keep it simple. You don’t want to dread your monthly budgeting task so if purchasing a cute notebook to keep track of your monthly spending motivates you, then do that! Do what feels reasonable and effective for your current lifestyle.
When creating your monthly budget, you need to be realistic about the amounts you set for each category. If you commute an hour to work every day of the week, a $150 monthly budget for gas is not going to cut it. Likewise, you don’t want to associate guilt with things that fall outside of the “responsible” budget items. If coffee out with a friend 3 times a month is something you value, then build that into your budget. If your finances are in dire need for intervention that’s one thing, but if you’re just getting your feet wet with budgeting and still want to live your life, acknowledge and document your fun money spending and assess whether you can afford the extras or if you need to cut back.
Make the Commitment
Creating a budget is the easy part. The hard part is actually sticking to your guns when it comes to excess spending. Sale prices, discounts and “save now” benefits are not actually saving you money if you’re buying things you don’t actually need. Focus on what you budgeted for and know that if you are purchasing outside that plan, then you will need to cut spending elsewhere. This will help keep you on track.