Life can be busy and overwhelming at times, and trying to manage your finances can add to the stress. With so many responsibilities and expenses to juggle, it’s easy to fall behind. However, creating a budget can be a simple yet effective way to gain control of your finances and relieve some of that stress. It can also be a powerful tool to help you achieve your financial goals, whether it’s paying off debt, saving for a vacation, or building an emergency fund.
Yeah…we can hear you groaning from here. But you read the headline, right? We’re going to make this super simple! In this post, we’ll provide a 3-step guide to building a budget that works for you. We understand that life is hectic, and finding time to manage your finances can seem daunting. But we’re here to help you get started! Just grab a pen and piece of paper (or use the budget sheet linked below) and your favorite beverage and let’s dive in!
Step 1: Money Coming In (Income)
Let’s start building your budget! To begin, we need to figure out how much money you have to work with. This is your NET Income – the amount you actually receive after taxes and other deductions each month.
This could be from your job. It might be from unemployment or Social Security/Disability payments. Maybe you have a pension or a side hustle? Make sure to include any child support, SNAP, or WIC benefits you receive regularly. Basically, any money you can count on each month should be added up.
But don’t include one-time deals, like birthday money from Grandma, winning lottery tickets, or selling unwanted gifts on Facebook marketplace. Those don’t count as regular monthly income.
Once you have everything, add it all up and write the total at the top of your page under Total Income. Great job! This was easy, right? Now let’s move on to the next step.
Step 2: Money Going Out (Expenses)
The second step of building your budget is to take a closer look at your expenses. We know, it’s not the most exciting task, but it’s like eating your veggies – it’s good for you and it will eventually lead to dessert. So let’s get it over with.
There are different ways to approach this step, and none of them are right or wrong. We tend to recommend grouping your expenses into categories such as Home, Food, or Subscriptions. This way, you’re less likely to forget or miss something. But maybe you prefer to keep track of your bills on a calendar, or maybe you go down the line of your bank statement.
Whatever works for you, just make sure you’re writing down everything you spend money on each month. Until you see your expenses in black and white, they won’t feel real, and your brain might try to ignore them.
So, what expenses should you include? Everything you can think of, and then some. Start with the essentials like rent or mortgage, utilities, insurance, and phone bills. Don’t forget about transportation costs, whether it’s car payments, bus passes, or gas. And then there are groceries, eating out, shopping, streaming services, and more.
You might also have additional expenses like pet care, haircuts, gym memberships, and kids’ activities. Write down everything you can think of, and if you remember something later, you can always add it in.
For expenses that vary from month to month, like groceries or eating out, just make a good estimate. How much do you normally spend at a restaurant, and how often do you go? Round it up a bit to give yourself a cushion.
Once you’ve added everything up, write the total and you’re done with Step 2. Take a sip of your drink (you deserve it), and let’s move on to the final step.
Step 3: The Sum of All Parts
Congratulations, you’ve made it to the final step of building a budget! Subtract your Total Expenses from your Total Income, and voila – you have your budget! What, did you think there’d be more? We know it may seem simple, but don’t underestimate the power of having a budget in place. And remember, a budget is just a tool to help manage your money, not the end goal.
The goal is to live the life you want to live and do the things that matter to you, and having a budget can help you achieve that.
That’s the real balancing act. But don’t worry, we’re here to help you along the way. You have one tool in your bag, but we have plenty more tips and tricks to share. And if you’d like help bringing your budget to life and using it to achieve your financial goals, our financial coaches would be thrilled to help you! You can learn more about that service here, or you can dive right in and sign up for coaching here.