I\u2019m always surprised at how many people I know who don\u2019t use a budget.\u00a0 Some think that budgets are restricting, and others flat out say I don\u2019t know how to make a budget!<\/em><\/strong> <\/a>Personal finance isn\u2019t rocket science, and it doesn\u2019t have to feel restricting. \u00a0 In fact, once you know how to make a budget, I\u2019d say you\u2019d start to feel a little more freedom from the dreaded \u2018paycheck to paycheck\u2019 <\/em>lifestyle that haunts millions of Americans.<\/p>\n If you need a budget, you\u2019ve come to the right place.\u00a0 We are going to cover the basics parts of a budget plan which includes: a budget worksheet, budget projections, and free budgeting software \u2013 all of which will help you understand how you can make a budget that works for you!<\/p>\n Your personal budget is a way for you to track two things:\u00a0 income and expenses.\u00a0 It\u2019s basic addition and subtraction and you need to keep one lower than the other.<\/p>\n I know you\u2019re saying, \u201cThat\u2019s obvious! \u2013 keep expenses lower than income.\u201d<\/strong> Yes, it\u2019s the basic principle of live on less than you earn<\/em>.\u00a0 Unfortunately, the average American household has over $5,000 of consumer debt, so this simple principle hasn\u2019t caught on for everyone yet!<\/p>\n Ok, I get it.\u00a0 Spend less than you make \u2013 but there\u2019s one problem.\u00a0 I DON\u2019T KNOW HOW MUCH I SPEND!<\/strong><\/p>\n This is what keeps a lot of people from starting a budget in the first place.\u00a0 It\u2019s also the first step in making a budget that works, so read on to get started with your budget.<\/p>\n In order to tell your dollars where to go, you need to see what\u2019s been happening with them each month! There are two ways you can do this:<\/p>\n You\u2019ll start to see some common categories and you\u2019ll want to add up the expenses in each category to see what you\u2019ve been spending your money on.\u00a0 Here are some common budget categories to help get you started:<\/p>\n Groceries<\/p>\n Dining Out<\/p>\n Mortgage\/Rent<\/p>\n Charity<\/p>\n Phone<\/p>\n Utilities<\/p>\n Cable<\/p>\n Car Payment<\/p>\n Gas<\/p>\n Car Insurance<\/p>\n Auto Maintenance<\/p>\n Home Health and Life Insurance<\/p>\n Pet Care<\/p>\n Student Loans<\/p>\n Entertainment<\/p>\n Credit Cards<\/p>\n Retirement Savings<\/p>\n For most people, their main paychecks are pretty stable and predictable.\u00a0 If you have side income that\u2019s not really consistent, I would take 80% of your average side income and add it to your steady income to get an idea of how much you\u2019re earning each month.<\/p>\n Once you have a total figure from step one, you can subtract it from the figure in step two to find how much extra you have each month.\u00a0 If it\u2019s positive, congrats!\u00a0 If it\u2019s negative, well, don\u2019t freak out yet.\u00a0 The next step is to look at your expenses in detail to see how much money is going towards each category.\u00a0 This is where you might need to make some adjustments to your spending.<\/p>\n There will be certain categories that might not change that much: rent, giving, insurance, student loans.\u00a0 You\u2019ll notice them as you look through your expenses.\u00a0 You may not be able to trim these down, and that\u2019s normal.<\/p>\n Now look at the categories that seem to have no cap on how much is spent.\u00a0 This is where you might be cutting back some in your spending. Groceries, eating out, entertainment, phone, pets, and credit cards can spin out of control sometimes.<\/p>\n This is exactly why you\u2019re creating a budget.<\/strong><\/p>\n It\u2019s not a problem to spend your money on entertainment and fun stuff.\u00a0 It\u2019s just a problem when the amount you\u2019re spending is out of sync with your income<\/p>\n Here are some suggested guidelines for setting the limits in each category.\u00a0 While some would say to use gross income (before tax and other withholdings), I would recommend setting your budget on the actual income you receive from each paycheck (net value).<\/p>\n Charitable Giving \u2013 10-15%<\/strong><\/p>\n Saving \u2013 5 \u2013 15%<\/strong><\/p>\n Housing \u2013 \u00a025 \u2013 35%<\/strong><\/p>\n Food \u2013 5-15%<\/strong><\/p>\n Utilities (phone, internet electric, cable, etc) 5-10%<\/strong><\/p>\n Transportation \u2013 10-15%<\/strong><\/p>\n Medical\/Health \u2013 5-10%<\/strong><\/p>\n Clothing \/ Personal \u2013 5-10%<\/strong><\/p>\n Recreational \/ Entertainment \u2013 5-10%<\/strong><\/p>\n Debt \u2013 5-10%<\/strong><\/p>\n Again, these are just suggested guidelines.\u00a0 Your budget might have a category or two that seems too high \u2013 you might not even use some of these categories on a regular basis.<\/p>\n I hope you don\u2019t feel like a budget is a chore.\u00a0 If you don\u2019t have it down right away, don\u2019t give up!\u00a0 You\u2019ll eventually learn how much you can trim in your expenses.\u00a0 Plus, when you keep a budget, you can see where your money is going and set goals for saving extra each month.\u00a0 Instead of having all your extra side job money go to pay the bills, you might find that your newly created budget lets you save all that extra income for a newer car or whatever you want to put it towards.<\/p>\n I\u2019ve included a spreadsheet that allows you create a budget by hand.\u00a0 I still like this method because it\u2019s a little more involved and lets you see where each dollar is going.<\/p>\n <\/p><\/a><\/h3>\n But, it\u2019s not what I use anymore.\u00a0 I\u2019ve found that the best way for us to budget is through a free online tool called Mint.com.<\/p>\n You may have already heard of Mint.com<\/a> You can set goals, automate certain transactions, link your student loans, credit cards, auto loans, and bank account all within Mint.com<\/a> While Mint.com<\/a>What is a Budget?<\/h2>\n
Steps To Make A Budget<\/h2>\n
1. Track Spending For a Month<\/h3>\n
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2.\u00a0 Write Down All Income<\/h3>\n<\/div>\n
3. Control Variable Items In Your Budget<\/h3>\n
4. Stick With It!<\/h3>\n
The Best Way To Budget<\/h2>\n
Here\u2019s the spreadsheet (Excel Budget Spreadsheet)\n
![\"budget](\"https:\/\/wp-media.patheos.com\/blogs\/sites\/618\/2011\/06\/budgetsnapshot.jpg\" "\\"budget")
<\/a><\/h3>\n<\/h3>\n
and hopefully you\u2019re using it!\u00a0 But if you haven\u2019t heard of it, it\u2019s a free online tool that tracks your spending and automatically categorizes each transaction you make.\u00a0 Sweet huh?!\u00a0 We\u2019ve been using it for almost three years now and have really found that it makes budgeting simple.<\/p>\n
.\u00a0 I haven\u2019t run into any security issues, nor have I heard of any problems from users.\u00a0 Since Intuit owns Mint.com<\/a>
, I\u2019m confident that they have strictest of security features.<\/p>\n
Other Budgeting Options<\/h3>\n
is a great way to track your spending, other sites can be helpful as you try to project your budget and plan ahead for expenses.\u00a0 Two sites that have really been at the top are Mvelopes and You Need A Budget.<\/p>\n