Most people associate the word budget with a negative thought. They find the word restricting. They hear it and the cringe. But that’s not what a budget is. Living on a budget is about living within your means. It’s about you being in control. A budget doesn’t mean you don’t have any money. It means you control where your money goes. The more control you have over your finances, the sooner you will reach your goals.

You need a budget! Millionaires have budgets. That’s how they stay millionaires. Business have budgets. That’s how they don’t go bankrupt. Having a budget is a tool you use to stay on top of your finances, control your spending, reach your financial goals… Having a budget is essential to your financial well being.

Before you can create a budget, you need to have an understanding of what your financial situation is. If you haven’t read the post Awareness, go back and read it first. You need to be aware of your income, your expenses, your habits, your needs, and your wants. You don’t have to have a month or year of tracking before you can do this. You can create an estimated budget and adjust as you track.

There are any number of apps and websites that have budgeting tools available. If you prefer to use one of these, go for it. Although I am not an advocate for a paid plan. There are plenty that don’t cost anything or have a free version. Utilize them if you like. Or use paper and pen if that’s easier for you. Every Dollar is a decent budgeting app that has a free version and is fairly easy to use but there are others.

Or, if you’re a spreadsheet nerd like me, create one for your budget. Here’s a link for a very basic one I use with some of my clients and class attendees. You’ll need to save it before you can make your personal edits. Formulas are already in place so for each item, enter what you expect the expense to be in the Expected column and if you utilize the Tracking section weekly, the Actual and the Remaining column will automatically adjust to reflect what you have left for each line item. Feel free to make any changes, updates, edits, or whatever you need to do to make it yours. This one is based on a semi-monthly paycheck.

Blank Monthly Budget.xlsx

Creating a Budget

• Figure out your expected monthly income. Make sure to include expected pay from jobs as well as any side hustles, child support, social security, or any other income you may receive but don’t include food stamps. These are not cash and should not be considered in your cash flow. If you receive this benefit, you will simply adjust or eliminate your Grocery line item if needed.
• Next, figure out all your current expenses such as housing, utilities, insurance, transportation, groceries, etc. Even if you’re not going to use the spreadsheet, I recommend checking it out to get an idea of some of the most common expenses people have in their budget so you can get a more accurate reflection of your own. Even if you don’t know the exact amount of a particular expense, take your best guess. You can adjust it later if needed.
• Subtract the total of your expenses from the total of your income.
• Make adjustments. If there is a reasonable balance remaining, I recommend leaving it as a Miscellaneous line item to act as a buffer in case something ends up being more than you expected, or there is an unexpected expense. If the remaining balance is high, perhaps you should consider adding more to your savings or paying extra towards a debt. If the remaining balance is negative, you need to make some adjustments in your budget. Some expenses may not be able to be adjusted, such as your mortgage or utilities, or even debt payments, but others can be flexible. Look at the amounts you allotted for spending, dining out, entertainment, or any areas you feel are non-essential and start by reducing those amounts.
• Track your spending as the month goes on using whatever method you choose, but do it. Make a note in your budget of how much you have spend in each category and how much is remaining. If you track as you go, you are more likely to notice when you’re getting close to the spending limit you planned and less likely to overspend.

Remember, it’s more important that you do it than it is to be perfect. It’s ok if you make a mess of it at first. You’ll get better with practice and when you make budgeting a habit, you’ll find that you are in control of your money, not the other way around.