6 Simple Steps to Create a Budget that Actually Works

Setting up a budget plan can be a challenge to anyone who is new to budgeting. But it can be as simple as you make it, and still get the job done. Creating a personal budget plan is important in helping you manage your finances correctly, and get the most out of your money!

A budget will not only help you plan where you’re going to be spending money, but it will also help you later see if you did, in fact, stick to your plan, or if you overspent.

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Learn How to Create A Budget That Works!

Step 1: Determine your income

This is the easy part! Add up your total income for your family. Don’t forget about extra money you may receive, such as money from a side hustle, birthday/Christmas money, a spouses income, bonuses from work, etc.

Step 2: Make a List of Your Fixed Expenses

Fixed expenses are bills that do not change from month to month. Here are some examples of fixed expenses that most families have:

  • mortgage payment or rent
  • car payment
  • car insurance
  • health insurance
  • utilities (water, gas, electric, etc.)
  • phone bill
  • internet
  • tv (cable, netflix, hulu, etc.)
  • monthly subscriptions (amazon prime, product subscriptions, etc)

Step 3: Make a List of Your Variable Expenses

Variable expenses are expenses that are subject to change each month. Make this list, and add the amount you WANT to be spending in each category. Here are some examples of variables expenses:

  • groceries
  • dining out
  • gas
  • entertainment (going to the movies, family activities, etc)
  • payments towards debt
  • money going into savings
  • miscellaneous (car repair, gifts for birthdays/weddings)

Step 4: Add Up Your Variable Expenses

It’s important to know how far off your budget plan that you currently are.

So, go through your bank account transactions, and add up exactly how much you’ve spent at grocery stores, at gas stations, eating out, on entertainment, etc.

If you realized that you are WAY far off of your current budget plan, you can go back and adjust it. If you’re spending $800 a month on groceries, and you only want to be spending $300, it might be unrealistic to try and make yourself cut back so much. So work towards your goal by decreasing it a little slower. You can tell yourself that you’re going to give yourself $500 this next month for groceries and cut back on your budget for eating out and family entertainment that month, to get that extra money for groceries.

Step 5: Add Up ALL of Your Expenses and Compare it to Your Income

This is where you will see where you’re going wrong (or right). If your income is higher than you’re spending, that’s great! This means you can use that extra money in smart ways, such as adding to your savings account, paying off debt, or making larger payments towards a mortgage or car loan.

Step 6: See How You Did

At the end of the month, see if you were able to stick to your budget on those variable expenses. It’s important to have a column on your budget plan for the amount you want to spend, and the amount you actually spent. Without going back and holding yourself accountable to your budget, you won’t know how you did!

Tips for Saving Money on Monthly Expenses:

If your income is lower than your current expenses, that’s a problem! You now have two options, save money, or make more money!

The first thing to do when you are trying to cut back your expenses is to see what you can completely eliminate. Bills such as cable and monthly subscriptions aren’t needs, they are wants. So get rid of them until you can afford them.

The next step is to see what expenses you can lower. As for fixed expenses, there isn’t a whole lot of room to adjust expenses. But you can find a lower internet price, and switch to a cheaper phone plan.

As for variable expenses, you can almost always cut back on groceries, eating out, entertainment, and sometimes gas.

Check out this article on the best ways to save money each month, and this article on saving money on groceries!

Budgeting tips to make your budget really stick:

Rework your budget EVERY month.

Your budget will change every single month. You will have birthdays to account for, Christmas, weddings, family vacations, unexpected car repairs or medical bills, etc. Something will always be different, and it’s important to be aware of extra costs so you’re able to rework your budget and fit those expenses in without spending more than you’re making.

Always try to put into savings

Even if it’s only $20 a paycheck, put money into savings. Having money in savings will help to pay unexpected expenses, such as medical bills and car repairs so that you’re not having to charge these expenses to your credit cards. Even if you have to cut back on other expenses in order to put into savings, it’s worth it!

Don’t use credit cards

If you can’t handle paying off credit cards each month, don’t use them. Unless it’s an absolute emergency, don’t charge to your credit cards. Once you have a charge to your account it’s easy to just keep charging things to the card.

Use cash for variable expenses, such as groceries, eating out, and entertainment, so that you aren’t able to overspend.

Use the right tools

People have different preferences as to how they like to create their budget plan. Some people like to do it on paper, and just re-write it each month. Others prefer to do it on a spreadsheet, like Excel (I use open office, free alternative to excel). Spreadsheets are nice, because you just set it up how you want it, and add in the numbers each month. It’s also easier to compare your budget to prior months on a spreadsheet because you’re just adding to it each month.

A lot of people feel more organized and successful with their budgeting while using a budgeting book!

Another really awesome budgeting tool is the Every Dollar Budgeting Tool. It’s an online budgeting tool that is free, and super easy to maintain! Check it out here!

Budgeting can be done in small simple steps or one big change, but don’t be overwhelmed! Make the changes that are manageable and realistic for you so that you can be successful!

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