How to Create a Budget
The dreaded budget. The thought of creating one and going with it can seem daunting. But it doesn’t have to be. Stick with me here and I will show you how to make a budget that helps you achieve your goals. I even created a sweet freebie to make the whole process easier.
Track Your Expenses
When I created my first budget, I had about 5 months of expenses tracked (reformed procrastinator over here). However, after just the first month, it was eye opening to see how much I spent.
That’s why I recommend starting by tracking your expenses. And when I say expenses, I mean every penny. It’s like a jolt of reality that motivates you to want to change your life (or pat yourself on the back). It also helps to have a baseline so that you can put realistic numbers in your budget. If you don’t have a month (or 5) to spare, you can track it for a week to get a general idea of your habits or look at your transactions in your bank account from the last month. I even have a free tracker available to help you with this process. There are plenty of categories on the tracker, but there are also custom spaces so you can personalize it.
Evaluate Your Spending
After I saw what I was spending money on, I really took the time to evaluate what was important in my life. During that time, I could barely cover my rent sometimes (former broke college kid over here). So it was a matter of cutting back in other areas and finding a side gig so I could pay my rent without heart palpitations.
But let’s say you don’t have an income issue and you just really want to travel more. Evaluate what doesn’t bring you as much joy and cut back in those areas. For example, you realize you don’t need as big of an apartment as you have now so you downsize and put $300 more a month towards your travel fund. Smaller tweaks work too so just go line by line and keep in mind what you want out of life.
Write Out Next Month’s Numbers
After I decided how I wanted to change my spending, I prepared my first monthly budget. Feel free to use the budgeting form I created. Don’t make the mistake I did and forget to include special events that may be in that month. The whole reason for doing a monthly budget instead of a yearly budget is so that one time events, holidays, birthdays, as well as general life changes won’t be left out. Also, make sure that you are putting some money towards savings every month, even if you can only spare $5. That is extremely important for the overarching goal of financial freedom.
I experienced a shift in my mindset once I switched from just tracking my expenses to actually living with a budget. Every night I look at my bank account to update my budget spreadsheet and I think about what I am doing the next day/week depending on how much is left in that category. Having a budget actually helps me get my life in order. It literally becomes a vehicle to achieve your goals, not sacrifice your freedom.
To get your hands on the free monthly budget spreadsheet that includes an expense tracker tab, click here. If you need any help or have any questions, feel free to reach out to me. I’m always glad to help.
