How To Make A Successful Budget in 4 Super Easy Steps

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It wasn’t too long ago that I too had to Google how to create a budget.

Budget.  What an icky word.  It is one that used to make me feel confined.  Now, this very word means freedom.

For Rob and I, our path to paying off our debt and was made possible because of this handy dandy tool.  For us, our budget is the tool that allowed us to start living for our now and our future!

What changed?

We realized that money is not the root of all evilstress is!  The thing about stress is, the source of the pressure is not always apparent.  That is where Rob and I found ourselves at the end of 2017.

We had responsible debt

  1. A mortgage
  2. An auto loan
  3. A home improvement loan

The problem?  We were not managing our home and had no clue how much money we earned collectively every month, nor did we know what our household expenses were.  It was a passive approach to our managing finances which resulted in a passive approach to life, and it prevented us from living!

If any of this sounds familiar to you, then you are in the right place!

Today I will show you the value of a budget, starting with a beginners perspective.  I will take you step-by-step through a simple budgeting plan for beginners that works.

Read more about our debt pay off journey:  

What is a budget?

A budget is your ticket to living

A recent study by US Bank discovered that nearly 6 in 10 Americans are living a passive life.  The study showed that most Americans are not actively keeping track of their money.  This same study also concluded that stress over money is impacting close to half (47%) of our population.

For us, these statistics were in line with our life.

Rob and I spent years avoiding a budget.  For us, a budget reminded us of the days when we lived paycheck to paycheck.  It was our constant scolding voice that told us “No, you cannot have that because it is not in the budget.”

What have we learned since we decided to pay attention to our finances and our life?

We have learned that our budget is our opportunity finder!  It is the tool that helps us to find money and to make decisions with the money we spend that offers us the greatest reward.  

Our budget is now the reaffirming  “Yes!” that allows us to know the financial outcome of our decisions.   



Why is a budget so important?

Your budget is your estimation of how much money will come in and go out to cover your day to day living.

At its purest, it is your roadmap to meeting your financial obligations.  It’s your game plan that includes the money that you expect to receive and what you anticipate spending.

Your budget is your high-level review of your dollar as it breaks your money down into two simple categories, INCOME, and EXPENSE.  From there, your dollar is broken down into sub-categories that allow you to see the ins and outs of your money.

There is not a right or wrong or wrong way of developing your categories.  A personal budget is just that:  Personal.

When we started our budget, our primary focus was to pay off our debt.  Now that we have our debt paid off, our goal has shifted to increase our savings.  Since a budget is an ever-changing management system, we have updated our budget to reflect our new goal.




Let’s get started with creating your successful budget

To help you with the budgeting process, we have created a simple template for you to use.  This is a free template that will help you create a spending plan that you can stick to

Take a moment to download budgeting tool and then we can get started walking through the simple steps that show you exactly how to make a budget planner that works!

> > Download Our Free Budget Template Now



1.  Identify your “WHY” before you break out with the calculator

With a positive mindset start dreaming.  Identify where you are and where you want to be.  If you have a partner, they must be included in this dreaming phase for your budget to succeed.

Dreaming is the part of budgeting in which you will identify your “why.”  If you do not know why you are budgeting going into this process, then success will be out of your reach.

Please remember that budgeting is a PROCESS! 

It is not a one-time deal.  A successful budget is a living, breathing document that keeps up with your changing dreams.  One that will highlight all of the ugly before you can experience the rewards.

If you have a partner, they must be actively and willingly involved. You are working together to find your “why” is the most critical step.  This simple action will allow everything to fall into place.

Creating a budget is a relatively simple thing to do. 

To get you started, we will use the old school is the way of using paper since it is a good way to jot your ideas down, scratch them out, throw away the paper, then start over again.

Just know that there are so many tools out once you have perfected the basics.

There are digital tools such as a spreadsheet or free online tools from places like mint.com, Personal Capital, or Dave Ramsey’s Every Dollar App that can help you to track your purchases.



2.  Create a list of your income and your expenses.

The hardest part of starting a budget is just getting started.  Do not over think it.  Know that it is not going to be perfect.  It is a never-ending work in progress.  Just start with your known values and work out from there and know that there are going to be some surprises and setbacks in the upcoming months.

Review your bank statements, phone a friend, or merely guess.  You have to start somewhere!

Tip:  In the Monthly Recurring worksheet and the Expense Tracking worksheets that you downloaded are perfect to help you to get your thoughts in order.

 

 

It will take a bit of time, but you will get the hang of it!

You are going to jot down your money into two categories: Income & Expense

Income:  Whether you receive a set paycheck, or you work on commission, finding out how much money your household brings in is the easy part as there are fewer transactions to review.  Your deposits to your bank will generally always be fewer in numbers compared to your withdrawals.

Be conservative with your income estimation.  More money is always better than less money.

In this example, I have Christmas Gift and Side Hustle listed without a budgeted amount.
That is because I do not want to plan on spending the money.
I want any extra money to go straight to debt!

 

Income Examples

  • Paycheck(s)
  • Cash Back Bonuses
  • Investment(s)
  • Returned Purchases
  • Bonus Money
  • Interest Income
  • Side Hustle
  • Rental Income
  • Gift

 

Do not ever limit your income!  Just because you earn a paycheck, do not allow that paycheck determine your worth, your value.  You are the only one that can do that!  

 

>> Don’t be afraid to get out there and make a difference and increase your income!

 

Expenses:  This is where you can get bogged down.  Start with your bills:  housing, utilities, and insurance and then set target values for the variable items such as consumables, dining, entertainment, etc.

You need to have an idea on the sources and uses of your dollar.  Here are a few ideas of categories and subcategories to get you started.  How granular you get is entirely up to you.  The way we look at it is the simpler, the better.

Expense Examples

  • Annual Expenses – Property Tax, Auto Registration, Insurance
  • Auto – Fuel, Parking, Service
  • Bills & Utilities – Television, Electric, Internet, Phone, Water
  • Consumables – Groceries, Paper Goods, Cleaning Supplies, Skincare, Pet supplies
  • Dining & Entertainment – Coffee shops, Fast Food, Restaurants, Alcohol, Arts, Music & Movies, Travel
  • Fun Money – This is a small amount of money that you do not need to keep track of
  • Gifts & Donations – Gifts, Charity, Tithing
  • Personal Care – Gym, Hair, Spa & Massage
  • Savings – Emergency, Vacation, New Home, New Car
  • Shelter – Mortgage, Rent, HOA Dues, Insurance

 

List out all of your know expenses with the day of the month that they are due. If they are on auto pay, be sure to mark the auto pay box. This sheet is there to remind you of upcoming bills and serve as your annual confirmation that all of your bills have been paid on time.

 

 

You will keep track of your money with these monthly worksheets, but when you are just getting started with budgeting, they serve as an awesome tool to determine how much money you spend in each area.   These sheets make sure that you are staying within your budget and allow you to find leftover money and put it to work. This leftover money is perfect for paying toward debt, adding it to your savings, or investing the money into your future.

 

There are so many variables when it comes to keeping track of your money. One of the Achilles heels of any budget is are the annual expenses. It is really easy to get caught off guard, come up short, and have to revert to charging these types of bills and expenses. To help you out this budget binder system includes a recurring annual expense sheet. This is a great place to store bills, birthdays, and holidays to make sure that you are prepared for anything.

 

Budgeting is all about being prepared and being prepared is what sinking funds are all about!  When you are actively budgeting your money, you want to make sure that you do not have any surprise expenses that will trip you up.  This can be holidays, birthdays, annual expenses, or car repair and replacement.  Use this sheet to make sure that you are prepared and keep track of your available balances and progress.

 

>> Learn more about the power of sinking funds

3.  Now for the math part of the budget

Once you’ve identified your income and your expenses, it is time to total them up. Take the income total and subtract the expense total.  No matter what the outcome is, know that it will be okay.  You have survived this far and now you have a starting point.

If you fall short and your expenses exceed your income, it is time to get scrappy and find more money or reduce your spending.

If you have a surplus, now you have some goal money! 

>> Set monthly goals, quarterly goals, annual goals, and long-term goals.

Every month you will update your budgeted income and expenses numbers and calculate the difference between the amount you planned (budgeted) and your actual amounts.

Now that you know how much money you have coming in, your income, and how much money you have going out, your expenses, now is the time to set a few goals.  On your Budget worksheet, you need to map out how much money you are budgeting for the upcoming month.   You are going to list out all of your income and expenses by category and how much you plan, budget, spending or receiving in the upcoming month.
By following a zero-based budgeting system, you will be able to pay off your debt, fund your dreams, and build financial freedom in no time.  The act of paying attention to your money is powerful.  With this budgeting template, you will no longer feel broke and you will be focused on whatever goals you have set.

 

> What is zero-based budgeting?




4. Keep up with your budget

There is no time better than today to start taking charge of your life. Although it may sound a bit overwhelming, managing your money is a liberating way to reduce stress and start living your life.

Discipline is the bridge between goals and accomplishment.  – Jim Rohn

 

Creating a budget and living by it does involve some discipline but it is a truly proactive approach to turning your dreams into realities.  Your budget will serve as your accountability tool.  It will document your successes and remind you of your shortcomings as it guides you to building meaningful wealth.

In Conclusion

Be prepared for some rough waters.  Learning how to budget will take practice.  Our biggest advice to you is to set up a budget that you can succeed at.  

  • Underestimate your income and
  • Overestimate your expenses

 

Your dreams must be at the core of all of your financial goals.   The goal of your budget is to improve your life, enhance your awareness, and steer you toward doing really awesome stuff!

Do you track your money with a monthly budget?
Does your budget prevent you from living your life or encourage you to live your life to its fullest?

Heather McInelly

Heather McInelly

Hi! I am Heather. A mother of two and wife of 27 years to my best friend. After our kids left home, I began digging deep to learn more about myself and about my lifelong partner. This journey helped us to pay off over $50,000 worth of debt in only six months, kick my twenty-something year relationship with smoking, and get in touch with my dreams. This experience prompted Rob and me to start this site, Empty Nestin' in hopes of helping others navigate through this exciting time of being empty nesters.

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