How do I create a budget?
Good question! Here are a few tips on what not to do with your budget. In another post, I’ll share how I created my budget. Now that we have that out the way. Why are budgets important? People often ask, how do I create a budget because either they’ve never done it or they’ve heard about it yet aren’t sure how to do it. Both understandable variables. A budget is a roadmap on your spending. Expenses vs. income.
Step I to creating your budget
The easiest way to budget is to take a sheet of paper, draw a line down the middle of that paper. Write down your income on the left side and your expenses on the other side. If that’s not your cup of tea then there are great apps like Mint, Excel spreadsheets, You need a budget (YNAB), and EveryDollar. Listing out your expenses can be difficult because there are things we buy that we don’t think of as expenses. Start with your four walls, food, transportation, shelter, and utilities. List out subscription fees, tithing costs, groceries, eating out, household costs, health care, and insurance all on the expense side. Not all expenses are bills. Some expenses are investments but are an expense nonetheless like retirement, sinking funds, saving, tithing, and charitable giving.
Actual spending versus budgeted amount
Now that you are using your budgeting app of your own choosing, enter the numbers for what you think you’re going to spend and what you’re bringing int. The best way to make budgeting palatable is to do check-ins on a weekly basis. If you do it monthly it can be overwhelming. My suggestion is to have a budget meeting on a weekly basis with your spouse.
Sources of Income
Do you have dual sources of income? An inheritance, a payout from a lawsuit, child support, royalties, or just money from a side hustle? List out all of your earnings on the income side. If you have a high yield savings account with banks like Ally Bank or American Express then you can add the interest you gain into the income section. If you make money from stocks that pay out quarterly dividends then add that to the income section.
Put a bow on that budget
This process will take a few months. Generally, when you make your first budget it takes close to three months to get in a regular cadence. If you struggle with credit cards check out the envelope slash cash system. I used cash envelopes to get out of debt, it keeps you in line.