Imagine opening up your bank account and the number showing is the one you expected to see. What if you even know why it showed that number! 

You can do that, you just need a budget.

You need to have a budget are some cringe worthy words for a lot of people. There are people that aren’t aware of where there money is going. At the end of the month they take a look at the bank account and can’t for the life of them figure out why there is only $5.00 left. During the month they take the approach of ignorance is bliss. A third Starbucks coffee today, yes please!

Sound Familiar?

No worries, you can change that!

Budgets can get technical and complicated. They can be a time suck and completely unmotivating.

The goal today is to review the aspects of a budget so it doesn’t seem so foreign and scary.

Before you dive in grab a cup of coffee or a glass of wine and let’s get to it.

What is a Budget?

A budget is a way to record what your income and expense will be over a period of time.
It doesn’t sound so scary when you simplify it, does it?

Generally, budgets have various categories to help you keep track of certain areas. This will help you pinpoint where your spending goes.

While there are many versions of budgets the budget that will be discussed today is going to help you account for all of your money each month.

Why do you need a budget?

Money makes the world go around. Whether you like it or not money is necessary to live in society at this point.
Taking control of your money situation will help you get out of living paycheck to paycheck and achieving your financial goals. Everyone’s financial goals may be different because we all are at different points in our lives. Whatever point you’re at a budget is still relevant and purposeful.

How do you make a Budget?

Before we do this it’s important to remember that there are steps that you can take to change any category. It will not be productive for you to feel shame, guilt, or beat yourself up about your spending habits.
You need to take a look at where your money is coming from and where it’s going. Take a look at all your transactions in the past few months and divide them into categories that make sense for you. I will go over some broad categories but these can be broken down even further.
Need some help getting your budget set up, grab my free budget templates below!

Income

The first step to setting a budget is to figure out how much money you have coming in every month.

This can be an easy step if you get paid a set amount every week or biweekly. You take those amounts and calculate how much you bring in every month.

Even if your pay is irregular find an estimate you would be comfortable basing your budget off of. There may be months that your income is lower than that but you can take that into account when you have months where your income is higher.

Make sure to include any money you bring in in this section. One of the purposes of a budget is to be able to see where your money is going. If, you don’t include it in a section that will not be possible.

Some other sources of income may be a side hustle or monetary rewards from programs.

A budget is an adaptable tool. As your income changes you can update your budget to reflect that.

Expenses

Where is all of your money going?

There are going to be clear expenses that happen on a monthly basis. Think of rent, car payment, insurance, etc. Don’t forget your subscriptions services. looking at you Hulu and Netflix.

You will also have expenses that may not be the same amount every month but you will be able to identify the range they generally fall in. For example, trash pickup in my area is billed every three months.

Sinking Funds

The term sinking fund refers to money that you set aside to use for a specific purpose. This is what sets it apart from a savings account. Savings is money you set aside for a variety of reasons. Sinking funds are useful for planning for expenses that you know are going to happen. These expenses may include things like Christmas, travel, etc.

Making room for these in your budget allows you to not get hit with those expenses all at once when the time comes.

Debt

Closing your eyes and wishing your debt away will unfortunately not work. Trust me, I’ve tried. Whether your debt is from student loans, personal loans, credit cards, and other forms of lines of credit you may want to put into this category.

Watching this category get smaller and smaller can be such a great feeling! You maybe be reaching for this number to be zero or want it to be a certain percentage of your income, there really isn’t a right answer. It is all personal preference but you can certainly find guidelines

Savings

Savings is always a good idea to have. This money will be available to you should you have a major expense unexpectedly. Being unable to plan for those unexpected expenses can lead you to racking up major credit card debt.

Investments

Do you have a 401k or another investment account? If, you don’t maybe now is the time that you begin to consider your options. Should you already have one it makes sense to track this category separately. There are goals

Final Notes

Once you create your budget make sure to use it! Don’t let all of your hard work be for nothing.

Budgets can be an out of sight out of mind situation. Depending on your comfort with a budget you may need to start out looking at your expenses on a daily basis to track how well you are staying within your set limits. As your comfort grows you can change that to weekly or monthly reviews.

Need a little extra help getting starts grab my free budget templates below!