How to Budget: Everything You Should Know About Creating a Personal Budget
How to Make a Monthly Budget…
First, take note that we are creating a monthly budget. Some people try creating weekly budgets but this tends to fail them because the time period is too short. It forces them to reassess their budget every week, and people quickly fall behind.
Monthly budgeting sessions are easy to manage. They keep you focused on how you use your income without forcing you to spend too much time on this task.
As you create your monthly budget, you should follow these steps:
- Determine Your Income
You should start your budget by finding your monthly, post-tax income. This should be income from all sources, including your primary job and any additional income you earn on the side.
- List Your Expenses
Now that you’ve established your total income, you’ll need to come up with a complete list of expenses for your upcoming month. You’ll want to include everything you plan to spend money on, such as:
Rent or mortgage
Electricity
Food and drinks
Child care
Gas
Car payment
Student loan payments
Hospital bills
Insurance (car, renters, home, etc.)
Car repairs
Phone bill
Cable/Netflix/Hulu/etc.
Entertainment (including nights out)
Donations/Charitable Giving
Retirement
Savings
First, every person is different and so are his or her expenses. When creating a budget, try to account for as many expenses as possible from month to month. You may have to pay an HOA fee, buy your kid’s sports gear or pay for continuing education to maintain a professional certification. Leave room in your budget for unexpected expenses that may arise throughout the month – consider opening a savings account to put money away for unexpected expenses so that they don’t derail your monthly budget.
Second, every month is different. You can’t expect to use the same budget every time; it will need to fluctuate based on your needs in the upcoming month. For example, your electric bill will be higher in the summer,
- Assign Income to Expenses
As with most things in life, making a monthly budget is all about choices. You’ll need to determine which expenses are necessary, and which are optional. When you understand the differences between a “need” and a “want,” creating a budget becomes easier.
- Track Your Expenses
As you progress through the month, keep track of your actual expenses and make sure they align with the budget estimates you laid out at the beginning of the month.
Budgeting apps make it easy to track your expenses. There are numerous free budgeting tools online, but you can also create a simple budget spreadsheet. If you’d like to keep your budget at your fingertips, check out these budgeting apps:
EveryDollar — An easy-to-use budgeting app that tracks your expenses as you go. Has a free version you can manage or a paid version that links to your bank account to track purchases.
You Need a Budget — Budgeting app with bank syncing, progress reports and alerts when you overspend. Free trial for 34 days and then costs $6.99 a month.
Mint — Links to your bank account, tracks expenses, pays bills and provides your credit score.
Whether you use one of these online budgeting tools, or a different one entirely, tracking your expenses is a key part of budgeting.
- Improve Your Monthly Budget
Starting a budget means learning how to live within your means. Your first few months could be difficult if you’ve never used a budget before. You may forget to add expenses or purchases to your budget worksheet. Don’t give up! With practice and persistence it will become second nature to track your spending and you’ll be able to better forecast your expenses.
The above information is courtesy of : Farm Bureau Financial Services , 2018
