You may be wondering how to create a good budget. If so, you’re in the right place. Did you know over half of Americans do not have a budget? That’s a huge amount of people who aren’t tracking their money.
I truly believe that everyone should know where their money is going. If you create a good budget you will be much closer to reaching your financial goals.
I can always remember making a monthly budget. Mostly, because I needed to make sure I had enough money each month. Budgeting your money is useful when you are trying to save money or when you want to see where your money is going.
I have a personal conviction to be a good steward of money (Prov. 21:20). I can’t stand the idea of not seeing exactly where I spend my money each month.
It doesn’t matter how much money you make. Every size income level should create a good budget. First, you need to come to terms that you need a budget. If you have the wrong attitude your budget will fail.
Your budget doesn’t have to be time-consuming. Don’t think it is a hassle. Think of it as having control of your finances. You will have to put a little thinking time in but once you have your budget set, it’s simple.
The main part of my personal budget always stays the same. We may have little changes each month depending on our needs. For example, I have three children.
We may budget for something that they are asking for or someone’s birthday may be coming up and we need to budget for that. I always have a good feeling knowing where my money is going.
How to Create a Good Budget
1. Calculate your Expenses
This is the most important step to create a good budget. In most situations, one person in the household manages the money (I manage my households money). Everyone who is involved in financial decisions should sit together and calculate expenses. Calculate everything you need to live your life. You should be setting amounts for the following (this is an example of mine):
Utility Bills (Water, Natural Gas, Electricity, Cable, Phone, Trash, Sewer)
Cell Phone Bills
Life Insurance Contributions
2. Determine your Income
Now it’s time to figure out your income. Add up all the income you receive each month. We only receive my husband’s paycheck so it’s pretty cut and dry for us. Sometimes I earn extra money but it’s very simple for me to add that in when I receive it. I don’t rely on it each month to survive. Our reliable income comes from my husband’s job.
3. Determine your Allowance
These are things we need in life but we need to set a limit on each month. Here is an example of my allowances:
- Auto Gas (My budget is $200 a month because we live in a small town. This changes if we travel more often)
- Groceries (My budget is set to $600 a month for groceries)
- Eating Out (My budget is set to $200 a month. We usually break it into four $50 meals)
4. Set Saving Goals and/or Debt Pay Off Goals
These are things that are very important when budgeting your money. If you don’t figure them into your budget, you will overlook them. For a long time, I figured I would save whatever money we had left in the month. Well, that didn’t work for us. We ended up spending all of it every month. Now, my husband and I discuss what we want to save for each month. I add it the budget and we work on meeting that goal.
5. Set your “Wants” Expenses
These are the things you “want” each month. You don’t need these items to survive. Some examples of “wants” are going to Starbucks, going shopping for something you don’t need or your kids are asking for something at the store. I’m really strict with these things on our budget. I purchase my kids’ things they need.
It’s very rare that I get them things they “want”. We’ve encouraged them to buy things on their own. I was a child with lots of things and it didn’t benefit me very much. I ended up being ungrateful because I was handed everything. When I had to support myself, it was hard.
6. Track your Budget
I track my budget with the EveryDollar Budget App. It’s very easy to set up. I have the app on my phone. Every time I spend money on something, I add it to the category I created in my budget. Mint is another option for a free budgeting app.
Learning to create a personal budget is a step in the right direction. I highly recommend that everyone creates a budget. Budgeting your money will give you freedom in your finances. Feel free to contact me if you have any questions.