Creating a Budget 101
This is Budgeting 101 for all of you who have never created or used a budget before. Many people think a budget is limiting, but creating one will free you. You will have more time to focus on other things if your money plan is working right. And you’ll worry less about money if you control it instead of letting it control you.
It’s Simple to Set Up
You can put together a budget fairly quickly once you gather the information you need. You will need your income, your fixed expenses, and your estimates of your other expenses. Yes, all you need is those three things.
Determine Your Income
This is simple; you need to know what you earn in a month. If you are on a fixed monthly salary, you probably already know what it is. If you are paid hourly, estimate it based on your average paycheck. You need to know your net pay, that is what you bring home after all deductions. If you get weekly checks or every other week, you will end up a few times a year with an “extra” check, those are great for savings.
Add Up Expenses
You have two types of expenses, fixed and variable. The fixed are those that don’t change from month to month such as insurance, mortgage, car payments and phone/cable/internet bills. Variable expenses will be trickier to budget for since they aren’t a set amount. I know I spend about the same amount every month on groceries and household items, so I have them combined in my budget. If you eat out regularly, add up what you’ve spent in a few months to see what your average is. And don’t forget to add your savings account as a budget item!
Congratulations, You Now Have a Budget
Your expenses should equal or be less than your monthly income. If so, use the numbers you’ve come up with for a few months. Then go back and compare your actual numbers and tweak the numbers if needed. You should do this for the first 6 months, then revisit it yearly as your income or expenses change.
Track Your Money
Once you create a budget, you will want to track your spending. There are lots of ways to do it from a checkbook register, to a ledger book, to a spreadsheet. There are lots of free Excel spreadsheets that you can download and try out. Here is one I have been using for a few years, and one from our website.
Once you get comfortable with a basic budget, you can expand your categories. You will also probably want to look at how you spend your money and decide if you can trim any categories. Here at BillCutterz, we can help with that. Send us your monthly bills and we’ll do the work of saving money for you so you don’t have to haggle with service providers to get lower rates. You are likely overpaying on many of your monthly bills. The most common bills we work with are your Cell phone, Cable/Satellite TV, Internet, and many more. Click here to get started saving today.