Ready to start using a budget? A budget is the first step in creating your financial toolkit, but it doesn’t have to be overwhelming.
So many people think of budgeting as this frustrating, boring, restrictive thing that tells them not to spend any money. I can honestly say that I love budgeting, and while many people probably don’t share my sentiments, budgeting doesn’t have to be a painful process. It can even be fun!
What is a budget?
When you think of budgeting, do you get a little pit in your stomach?
Maybe you know you need to start a budget, but you have no idea how or what a budget even is.
A budget is simply a plan that helps you create financial decisions that you can live with.
Maybe the thought of restricting your spending (no more dining out?!?) fills you with dread.
Or, maybe your spending isn’t the problem. Instead, you might have an overwhelming amount of bills, like student loan debt or medical bills, that you need to pay and your finances are stretched too thin.
Regardless, a budget is the perfect solution for your problems.
A budget is just a way for you to tell your money where to go. It’s a way for you to take control of your finances, both the good and the bad, so you know how you’re spending your money, and you can make educated decisions on your spending habits.
Budgeting doesn’t have to be scary. Most importantly, your budget should work for you!
Three Reasons Why you Should Start Budgeting Today
1) Planning: Doing a budget can help you to plan for the future. You can save for the future and make sure you have enough money to spend.
2) Savings: You can use your budget to set aside a certain amount of money every month as savings. This will help you save for an emergency or even retirement later in life.
3) Taxes: You can also use your budget to make sure you are taking advantage of all tax credits that are available for you.
Creating a budget is one of the best ways that you could start taking control of your finances today.
How to start using a budget
A budget doesn’t need to be complicated, but there are several factors to consider before you can actually start calculating how much you can afford to spend.
First, you need to look at your income, which includes your:
- Hourly wage
- Monthly salary
- Net income
Next, you need to take into account any expenses that are not related to your work such as:
- Rent or mortgage payments
- Utilities and other bills (e.g., gas, electric, cable, internet, etc.)
- Groceries or food (you can either add your dining out expense in this category or list it separately)
- Clothing
- Transportation expenses (car payment, fuel, insurance, parking fees, mass transit expenses, etc.)
- Medical/health
- Misc.
Lastly, it is always a good idea to set up an emergency fund for unexpected expenses or emergencies.
To find out how much money to include in each budget category, start by tracking your expenses for a few months and categorizing them.
Tracking your expenses is a great way to learn what you’re spending and where. You can get an idea about your monthly bills, costs for meals out, clothes and other purchases. It’s also a great way to get started in planning and saving for the future.
Make a list of the things you need each month (i.e., rent, groceries, student loans, etc.). As you spend money in each category, write it down.
Get the printable Organized Motherhood Budget Binder Workbook to simplify your budgeting process.
At the end of the month, total your expenses and find the average amount spent per month on each category.
Build your budget based on the average amounts for each category.
How to evaluate your budget
A budget will help you to understand where you are spending your money and why.
When starting, you may find that budgeting is easier to do on a weekly basis so you can make changes as needed.
Cash based budgets are also a great way to avoid unnecessary expenses and make sure you’re staying within your budget.
It is important to reflect on how you are spending your money. Consider the benefits of each expense and how it will be beneficial for you in the future. If your spending habits aren’t in line with your future goals, you’ll need to change your spending patterns (and your budget).
Once you figure out where your money is going, make adjustments so that you can start saving more of it.
It’s important not to get discouraged if you don’t meet all of your goals right away. It may take some time before the new habits stick and become normal – but with time, it will become easier for you to stick to your budget goals!
By following your budget and making regular adjustments to your spending habits, you’ll be able to reach your financial goals (vacation, new house, retirement) faster than you expected!