5 Tips on Creating the Perfect Budget

5 Tips on Creating the Perfect Budget

5 Tips on Creating the Perfect Budget 2 1 - 5 Tips on Creating the Perfect Budget

Creating the perfect budget doesn’t have to be intimidating or overwhelming. But first, what is a budget?

A budget is just creating a plan for your money. Kind of like how you create a plan to write a paper or create a plan for a day of fun. A budget is similar.

Now, if you don’t know how to budget or the thought of a budget causes you to stress, I am here to tell you to not worry! Budgeting can actually help you relieve stress!

It’s all about taking it step by step. Just like when you plan your day, you start with a section of the day like the morning and then move on to the afternoon and evening. Budgeting is the same concept and it must be broken down into sections and taken one step at a time.

There are many different apps to help you, or if you enjoy writing things down, check out these budget planners.


Step 1: Look at your Monthly Income

Take a look at your paychecks and see how much you bring in every month. If you get paid Bi-weekly, then add 2 paychecks together. If you get paid every week, then usually that is 4 paychecks that need to be added together. By knowing what you make on average every month will help you become aware of what you can afford.

However, if you wait tables, bartend, or live on commissions, look at your deposits on your bank statements and average a least three months.

Step 2: Subtract your monthly expenses

Monthly expenses are usually the following:

  • Mortgage
  • Car/Gas
  • Insurance
  • Utilities (electric, water, gas)
  • Food
  • Credit Cards and/or Loan payments
  • Phone/Internet/Cable/Netflix or other programs
  • Memberships
  • Savings (Pay yourself)
  • Miscellaneous

Look at your bank statements from the past couple of months. Take all your expenses and add up your purchases by category. Categories can include bills, food, extracurricular activities, etc.

Once you’ve categorized all your expenses and added them all together, next subtract the total from your monthly income.

Is the number negative or positive? If it’s negative, it’s time to prioritize and cut back. If it’s positive, you did well last month, but you should still create a budget because you might be able to put more money towards savings or debt.

Step 3: Check your calendar and due dates

Now that you know how much your average income is every month, and how much your bills and expenses are, now it is time to check those due dates. It is important to know when your bills are due every month, this will help you make sure you have the money in your account, so you never miss a payment.

For example; if your rent is due on the first and your car is due on the 20th, write it on your calendar and budget spreadsheet. Then, you will want to make sure that the paycheck you receive before those due dates will cover those bills.

Tip: Always try and make your due dates for bills are spread out through the month instead of all being due on the first or all on the 15th.

Example:

Type of Bill DueDue Date Every Month Amount
Mortgage1st$$$$
Car Payment10th$$$
Insurance (Car, House, etc.)15th$$$
Phone/Internet20th$$
Groceries5th & 20th (2x a month)$$$
And so on…..………………

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Step 4: Break it down and Create a plan

Okay, so now that you know your monthly income, you know the amount you spend on your bills, and you know when all your bills are due. Now is the time to break it down and create a plan. You can create that plan by working paycheck to paycheck or you could work it monthly. Whatever works best for you.

For Me, I know how much I make every month and I get paid bi-weekly. Therefore, I work by paycheck every two weeks, and the total amount I make covers all the bills for a month.

So first, I take what I currently have in my account, then I mark down my next payday. Once I know what and when I will get paid next, I then take all the bills that are due after that payday and before the next payday and subtract what is due.

For Example:

Take your current amount in account left over from the previous month: $100

Next paydays in January:

4th: $1000
18th: $1000

Bills/Expenses due between the paydays of the 4th and the 18th:

Bill/ExpenseDue Date Amount Due
Groceries5th$200
Cell Phone10th$300
Insurance11th$190
Credit Card12th$100
Loan (Student/Personal)15th$110
Savings15th$50
Total Due 4th – 17th$950

 (Total paid on the 4th) $1000 + (previous month remaining) $100 = $1,100

Total amount due in bills after the 4th but before the 18th = $950

$1,100 available – $950 bills = $150 remaining

Move on to next payday-> Payday January 18th: $1000 

Remaining after previous payday and bill paid = $150

Calculate what is due from Jan. 18th payday to Feb 1st payday.

Bill/ExpenseDue Date Amount Due
Groceries18th$200
Car Payment20th$200
Cable/Internet25th$150
Utilities25th$100
Total Due 18th – 31st  $650

       (Total paid on the 18th) $1000 + (remaining from last month) $150 = Total available $1,150

Total due from the 18th until next payday on Feb. 1st is: $650

$1,150 available$650 bills = $500 Remaining

And so on…. Work paycheck by paycheck. If you find yourself with not enough money to pay your bills in between paydays, that is ok! Just cut back on some expenses. Work out paying just the necessities only.

If you still don’t have enough, take from your savings to cover it until you can get to a point by working this method where your amount from the previous paycheck can overlap to cover the expenses. Also, once you get to the point where you always have the money available to pay and have extra, pay yourself back

5. Work your plan and revisit it every paycheck or more.

After every paycheck is deposited in my account I check my budget. After every bill is paid, I check my budget and mark it off. I re-budget, and if I have extra money or need more money towards something that has come up, I move money around and cut back on non-necessity purchases. This has helped me never go NSF in my account.

This is the exact method of budgeting I use and have used for over two years now. I have completely paid off two loans, one was over $6000 in 5 months and the other I had over $2000 left to pay and paid it sooner than expected.

By working paycheck to paycheck and being conscious of where my money was being spent every week, I have been able to have more money left over after bills to pay off debt faster. I cut out the expenses of eating out and instead started to meal plan before grocery shopping to prevent overspending on food. I have canceled memberships such as gym and massage envy to save money.

If I can do it, you can too! You can pay off the debt, save more, and live without stressing about money again. Budgeting does help relieve the stress because knowing what you spend money helps prevent you from overspending. If you spend $200 eating out every month and it has caused you to go NSF (non-sufficient funds) in your account, you can now say no or at least budget a certain amount for eating out monthly without going over.

Don’t be afraid to budget for those fun things like going out or purchasing a new outfit. But, make sure the necessary bills are always paid first.

I hope this helps to see another way to create a budget. It’s truly helped me overcome a lot of financial bumps and as I said helped pay and continuing to help me pay off the debt.

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Why Creating A Budget Is So Important!

Why Creating A Budget Is So Important!

Why creating a budget is very important - Why Creating A Budget Is So Important!

Do you feel like you’re always living paycheck to paycheck? Often find yourself with overdraft fees?  How about owing money on loans and credit cards? Is your savings account consisting of less than 3 months of living or maybe you don’t have savings at all?

If you answered YES, to any one of those questions then creating a budget should be top priority. When creating a budget, it really allows you to dig deep into your spending habits. Breaking down how much you spend opens your eyes to the reality of where your money is going and maybe why your paycheck seems to disappear.

Just being honest here, I use to not budget at all. For years I lived paycheck to paycheck, and when I wanted something that I didn’t have the cash for it was put on the credit card or taken out of my savings. I would think, “oh, I’ll just pay that off next month”. Then that balance on the credit card continued to grow because I couldn’t pay more than my minimum payment.

If you’re living this way, like I was, it’s time to start budgeting.


5 reasons why creating a budget is so important, no matter your income!

 

1. Helps you understand your spending habits

When you understand and see where your money is being spent, most of the time you start to see the random expenses on things you don’t really need. So, take a look at your card charges and receipts. Some items to start looking for are maybe coffee runs, eating out or on random subscriptions and memberships that you don’t use.

Often times, we don’t even realize how much we spend on things that are not a necessity until we create a budget. I like to call this “Blind Spending”, I don’t even know if this is a real term, but let’s go with it! Which leads me to our second reason.

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2. Helps see where you can cut spending!

Seeing the truth of where your money goes allows you to consciously think twice before eating out and it helps you cut out the things that are not a necessity.

For example, if you’re a coffee lover and grab a coffee at Starbucks or local café more than once a week that is at least $5 a cup.   It is much cheaper to make coffee at home. If you have a gym membership or any other type of membership but you find yourself going only on occasion or not at all, time to reevaluate where that money can be spent.

When you begin to cut your spending, you start to have more money to pay off debt and more money to put away into a savings account. If you don’t have a savings account, I highly recommend you open one soon.

 

3. Helps you pay off debt!

By understanding what you spend money on and reevaluating items that aren’t a necessity, this allows for more money to be used towards paying off those credit cards and loans.

Paying off debt should have high priority because the longer that debt sits, the more interest accrues. Whether it’s student loans, personal, mortgages, vehicles, or credit cards. The more interest that is accrued the more money you’re paying. So, the quicker you can pay off the debt, the quicker you will free up money from your paychecks. Trust me, this takes time but is completely attainable.

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4. Helps you Save more money.

Who doesn’t want to save more money? Saving money for personal reasons, emergency funds, or even travel is a delight. Being able to say yes to that beach trip because you saved to go on vacation instead of buying that Coffee latte every week is such a reward. When you budget, you are able to dedicate amounts monthly to put away while still making sure your important bills are paid.

Check out our related post: 10 simple ways to save more in 2019.

 

5. Helps you give more

Giving to Charity, Family, or Churches is a really nice way to give back. When you budget, just like savings, it enables you to set aside money specifically to help others. Give more than you receive and good will come back to you.

So in conclusion, now you know why it’s important and what a budget can do to help you financially, but you might be asking “how do I budget?” or “Where do I start?” Maybe, you are asking this because you’ve never budgeted, or your checks are different every time because you bartend/wait tables. We know how that is!

Currently, my husband bartends, therefore, we understand the fluctuation of income. One week you’re making $600 and the next you make $300. It’s not easy. However, even with the changing income you can still create a budget and work towards any goals you have like paying off credit cards and student loans.

To do this, we suggest taking the average amount made from 3 months. This will help you see on average what you accumulate, and budget accordingly. If you have a set amount you make per month, start by taking a look at your bank account statements to look at your purchases.

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As I mentioned, creating a budget no matter your income is important because whether you average $2k a month or $10K a month it’s good to know your spending habits. Sometimes the more you make, the more you spend. I have known people who make $10k a month that still lived paycheck to paycheck. Therefore, it doesn’t matter how much you make, living off a budget is important.

When I first started Budgeting I created my own in excel spreadsheet. I did this because I had taken a class on excel in college, so I knew my way around the basics. I have been using my excel budgeter for over a year now. It has helped so much, but one thing I wish I had was the ability to see and edit on my phone.

So, I just recently found this service called Every Dollar by Dave Ramsey. I just signed up for it and giving it a try. So far, I am liking it, but not ready to really review it or not. If you would like to check it out here is a link www.everydollar.com (this is not an affiliated link, I do not get a commission).

Since I have been budgeting, Matthew and I have been able to pay off the IRS, save to purchase our RV and Truck, and now in January, we will be getting rid of my smallest personal loan. We are working towards a debt free life, so we can have more money to give and more to travel.

So, no matter where you are in life or how much you make a month, it is never too late to start budgeting, get out of debt, and save more money.

Related Posts: 10 Simple Ways To Save More In 2019


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