Create Your Budget…

A budget sounds scary or boring.  But it is just a tool used for making decisions on how to spend your money.  A budget holds your emotions in check when they want to run crazy with your wallet. It is like a map on your journey to financial improvement.  If you would like more details on why you need a budget check out this article.

If you haven’t go ahead and read it now, I’ll wait. Now, for the question “how do I create a budget?”  If you have never actually had a written budget before then figuring out how to create a budget can feel confusing, but it doesn’t have to be.

When I talk with people one on one I recommend one of two methods depending on the preference of the individual.  I will talk through both here.

Create a budget on Paper.

1. Gather up all of your bills for the past month.
2. If you don’t have them from last month then keep them when they come this month.
3. Track every penny you spend. (Is this sounding familiar?)
4. Do it in a notebook, or keep receipts of your spending or use one debit card for all spending then use the statement to actually make your budget you won’t have to guess.
5. Put it down on paper.
6. If you don’t want to create your own there are plenty of places to find budget templates.  However, searching those out may lead to more confusion so here is a simple budget template to get you started.
7. Fill in the green spaces that apply to you and the yellow column on the right will tell you what percentage of your income you are spending on any particular category.  Fill in your mandatory spending first (Mortgage, Bills) and then determine where the rest of your money can go.
8. You may not need every single line, so only use what suits you.  I actually find it most useful to keep categories as broad as possible.  But, you need to do what is right for you and knowing that takes experience, so play with it.
9. My wife and I have gone through dozens of forms of budgets in our time of trying to organize our finances.
10. The last section of this budget will show you if you are spending more money than you make.  You can adjust categories from here and determine where you want your money to go.
11. Then follow up with all of your monthly spending and determine if you are over spending your budget.

Create a budget with Mint.

1. Mint is a free online personal finance program. (Also available on mobile platforms)  It is owned by Intuit the same company that owns Quicken and many other programs.  They have been in the business for a long time and they are very reputable and secure.
2. Sign up for an account on mint.com
3. Register your primary spending accounts
4. Mint will automatically pull in your all of your account activity and automatically categorize it for you. (Watch out they are not always accurate)
5. Use Mints built in budgeting feature to set up the categories for your spending.  Mint will let you know how much you have left in every category.  You can even set up a alerts to let you know.

Use Both

You can even use both.  We create our budget with the tempate on paper and then I enter it into mint.com to do the tracking work for me.  It is a little more work but I like it.

Having a budget down on paper, even digital paper is the first milestone in getting your personal finances under control.  There is something about actually writing things down that acts as a commitment device.  But, understand that a budget isn’t set in stone.  Month to month things may vary and you will have to account for that.

For the first few months you should keep a close eye on things and maybe make adjustments as needed.  You may have forgotten about something that you will need to adjust for.  This is not a “Set it and forget it” kind of thing.

Big step!!  You have the first draft of your budget!  It will take follow-up and work, but you now have the map that can lead you to your goals.  Keep an eye on it, adjust it over time

Well Done!  Tell me below how it feels in the comments…

Lesson 5