Do you have a budget set up? Are you interested in learning how to create a budget the easy way?
Having a budget is a great way to make sure you’re not overspending and it also helps to keep you accountable!
You can easily create a budget. It initially takes some time to set up but once you get it set up, it’s fairly easy to update.
I’ve created this guide to help you get your budget set up!
How To Create A Budget The Easy Way
Check Your Bank Account
To set up your budget categories, you need to know what you spend your money on. This step can be shocking. But you need to face your spending habits in order to make a better plan.
I was surprised by how much we spent on groceries and going out to eat. But facing it and being conscious of your spending is the first step to making changes.
What I did was print off my bank statement and then went line by line and totaled up what I spent the month before. I broke it down into categories. For example; groceries, eating out, entertainment, etc.
Make A Budget Plan Overview
After you total up what you spent the month before, create an overview. I like to do this step because it gives me the big picture.
I add in our income sources, Savings plans (ie, saving for a car, etc) and our monthly bills.
Once you get into a groove of budgeting and know what you have leftover each month you can fill in any extra debt payments that you plan on paying that month.
Create A Monthly Budget
Take everything you’ve gathered from your bank statements and monthly overview and start filling in your budget.
It’s important to be as detailed as possible. That way you’re not surprised later with an extra expense.
The first thing I do is put in our fixed items. These are items that are the same amount each month such as:
- Housing- mortgage/rent, homeowners insurance, etc.
- Utilities- electricity, gas, water, trash, phone, etc.
- Transportation- car insurance, car loan/replacement, etc.
- Insurance
- Debt- student loans, medical bills, credit card payments, etc.
The next thing I add is the variable or discretionary items. These items are things can change based on our daily living such as:
- Savings- emergency, retirement, college fund,etc.
- Giving
- Food- groceries, restaurants, kid’s school lunch, etc.
- Clothing
- Personal- household supplies, birthdays, Christmas, spending money, Netflix, entertainment, etc.
- Vacation
- Pets
This part of the budget is the hardest to figure out. You may have totaled up what you’ve spent on groceries and realized that you spend way too much. So what do you do?
Just put in your best guess. The USDA has food plan guidelines that could be a good starting point.
NOTE: This is as of MAY 2019. https://fns-prod.azureedge.net/sites/default/files/media/file/CostofFoodMay2019.pdf
I want to stop here and remind you that the first budget is not going to be perfect. It takes time to get a good budget set up and even when you do get in a good groove, things change.
Progress over perfection.
Sinking Funds
To help us stay on budget, we created sinking funds. What are sinking funds? A sinking fund is a simple way of saving money by setting aside money each month for a particular item.
We use sinking funds for maintenance, repairs, vehicle registration, birthdays, Christmas, etc.
We determined what we spend for the year in each category and then divided that by 12 months to figure out what we need to save per month.
So, for example, let’s say you spend $300 a year on Birthdays.
That’s $25 a month. <— This is what I would put in my monthly budget for Birthdays.
Then when it’s time to shop for birthdays, we have already been saving up for it and have the money in our account!
Sinking funds have been one of the best things that we have done for our budget. We set up so that it comes out of our account directly and goes into a Capital One 360 account.
{Check out this post here on why we use Capital One 360 accounts for our sinking funds}
Total Up Everything
This is where you find out if your budget works for you.
Total everything from your budget categories and subtract the total from your total monthly income. Do you have anything left over? Did you break even? Is your monthly budget more than your income?
Make Adjustments
If you’re like me, you’ll need to rework your budget to make it work.
THAT IS OKAY!
If it doesn’t work go back and figure out what you can cut. Could you cut back on groceries?
{Check out my posts on how to eat healthy and save money.}
Could you cut back on entertainment? Eating out?
Track Everything
Now that you have your budget set up you need to start keeping track of everything. This will help you stay on top of your budget and also keep you accountable.
I like to track:
- Bills- I like to check off that it’s paid each month.
- Savings- I like to know how much I have saved up for each savings goal
- Income- This is especially important if you have variable income.
- Monthly expenses- Yes it’s in on my bank statement but writing it down forces me know what I’m spending my money on. It’s easy for me to just quickly glance at it on my bank statement and not give it a second thought. Writing it down keeps me accountable.
- Sinking funds- We use Capital One 360 accounts to track sinking funds but again I track this in my planner for accountability.
- Yearly tracker- I use this as an overview for my sinking funds such as vehicle reg., repairs, Christmas, birthdays. That way I know what I pay annually and monthly.
- Debt tracker- I keep a running total of all of our debt. That way it’s easily accessible.
- Debt payoff- I work on paying off one debt at a time. The payoff tracker shows me an overview of my progress for that particular debt.
- Password tracker
- Yearly overview- Each month I track what we spent total on this sheet. I can look at any time and see what our income was, how much we spent on bills and debt and what we put into savings. I like this mostly because tracking progress motivates me.
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Making a budget doesn’t have to be hard at all! It just takes a little bit of time and patience and you’ll have a budget in no time.
Do you have any tips that help you with your budgeting?
