BeckyA budget is a form, written or printed, that predicts the amount of money coming in and going out over a specified period of time.
The overall purpose of a budget is to pre-plan how you would like to save and spend your money and how you aim to execute that plan.
A budget is a powerful tool when it comes to managing money. It helps you achieve financial stability by staying on target with your financial goals.
Not to mention, having a budget provides the ability to look back on previous months and view what expenses were due when. Then, you can prepare the same expenses monthly and even annually.
The benefits of a budget
The ability to keep your finances organized
Accountability
Stronger financial footing
Monthly vs Biweekly Budget
There are multiple types of budgets. When looking up the various types, you will be bombarded with how many types you can find. I’m talking annual, quarterly and even operating budgets to name a few.
However, we’re currently discussing personal finances. The 2 most used types for personal finances are a monthly budget and a biweekly budget.
It’s best to do at least a monthly budget. Some like to take it a step further and create a biweekly budget. Generally, biweekly budgets work better for those that are paid in a biweekly manner.
Regardless, this is all preference. If a monthly budget works best for you or perhaps you are paid on a monthly basis, feel free to track your expenses with a monthly budget.
Let’s Make a Budget!
Need help creating your first budget? Find one of my useful forms HERE!
Determine your income
Before creating a budget, you need to calculate how much you make. This should be your net income or monthly take home amount after taxes and other deductions are subtracted. My husband and I like to make a monthly budget, so we calculate how much we make together in 1 month.
This number will establish how much you can spend and save for the month. Try to make this number as accurate as possible.
It’s the worst when you estimate a higher amount of income than truly comes in. If you estimate too high, you’ll have to find areas to cut back on to balance everything out if you end up making less.
I like to estimate on the lower end for income and if we get paid more that month, we can go back and allocate more money to other categories.
Track your previous expenses
The first time I created a budget, I looked back through my bank statements from the past 3 months and tracked how much I had spent in repetitive categories. Can you even believe that I added up over $200 worth of morning coffee runs as a single lady who owned a Keurig?!?!??!! I’m STILL mortified.
Many times, we don’t realize we spend as much money as we do in certain areas. I’ve seen this happen a lot where people don’t account for basic things like coffee runs, getting their nails done and date nights. No matter what the expense, track it because regardless it’s going to come out of your income.
Add up how much you spent on gas each month. Did you spend over $200 on coffee like me?! Add the amount you spent on groceries each month for the past 2-3 months.
While the amounts vary month to month, this will give you an average amount spent each month. Giving yourself an average of how much you spend in any given category gives you a starting point on how much to plan your first go-around.
You did it! You made it through the tedious, number-crunching portion of this process. Let’s set a plan in place!
Make a plan
Now that we’ve tracked expenses from the past 3 months, it’s time to write down the expenses we anticipate coming out for this month. I like to group them together in certain categories.
I use categories like giving, housing, transportation, food, household, miscellaneous/other, savings, debt. However, this plan includes YOUR expenses so make categories that benefit you.
You may have multiple children and need a “baby/children” category. Perhaps you have lots of subscriptions and would find it beneficial to have a “subscriptions” category.
Now, let me break down what some of these categories might include.
In the giving category, my husband and I tithe 10% of our income to our church monthly. Though, if you have a little extra to splurge, you might be like us and enjoy giving elsewhere on occasion. It’s our absolute favorite to surprise an unsuspecting waiter/waitress around Christmas with an additional tip the same amount of our bill.
Next, we plan for housing. This includes your mortgage/rent, electricity, internet, water and garbage. We also like to include our home maintenance sinking fund in this category.
Transportation pertains to fuel, car payments and bus/subway passes. Again, we like to include our car maintenance sinking fund in this category for routine things like windshield wipers, new tires and oil changes. I’m sure by now you can tell we live by monthly sinking funds!
In the food category map out how much you will need for groceries, eating out and/or coffee. Although groceries are often one of the first things people budget for, coffee and eating out are frequently forgotten. Do NOT forget to add these in!
The household category is for things like toiletries (generally our Costco trip goes in here because of the many toiletry items we get there!) ie. – toilet paper, paper towels, laundry detergent, diapers, etc. We also include personal care items in this category ie. -toothpaste, deodorant, shampoo & conditioner and haircuts.
Other/miscellaneous-childcare expenses, pet food, pet sinking fund, gym memberships, chiropractor visits, platform subscriptions (Netflix, Hulu, Disney+) and home/auto insurance.
I know some of you might like to include your auto insurance in the transportation category and your homeowner’s insurance in the housing category respectively. It’s solely a preference.
Do what is easiest for you. After all, this is your budget! Plan it how you want to. You can add or remove as many categories as you need to.
The savings and debt categories are pretty self-explanatory.
Adjust as needed
Now that you have your categories and expenses listed out, be realistic! Look back each month and decide which categories had too much or too little planned. Then adjust those categories to make sure you set new attainable amounts for yourself and your family.
Be flexible. Like most new things, it takes practice and patience. You’re not going to get your budget right the very first time, but with each passing month you’ll start to feel an ebb and flow to the process.
I remember vividly doing my very first 21-year old budget. I planned $50 a month for groceries!! I caught on real quick to the fact that $50 a month was NOT feasible for me! I made adjustments each month until I was living within my means.
Review regularly
Last, but not least review your plan regularly. No two months are the same. While some months might be heavier with food expenses (holidays, parties), other months you will have higher transportation expenses for vacations and still other months you will have higher housing heating and air expenses with the fluctuating weather.
Remember, creating a budget regularly can not only give you more flexibility with your spending, but also help sustain financial freedom. When are you going to create yours?
