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Learning how to make a budget probably isn’t your idea of an exciting way to spend an afternoon.
But you totally need one if you want to have control over your money.
Even though it’s fairly simple to make a budget, not everyone does it. And not everyone who makes a budget sticks to it.
After all, being on a budget means you can’t have any fun, right?
It means saying no to anything extra and yes to doing without, or at least that’s how it feels.
But a budget can be your best friend if you know how to use it.
If you’ve never lived on a budget before or you’ve struggled with how to make a budget and stick with it, this post is just for you.
By the time you finish reading, you’ll be a full-blown budgeting boss.
Why You Need to Make a Budget
A budget is a plan for how you spend your money every month.
That’s it. Nothing fancy. It’s just you telling your money what to do.
But it can be a lot more than that if you’re constantly stressed over your finances. When you make a budget, it suddenly becomes a lot easier to:
- See where your money is going
- Figure out what you’re wasting money on
- Create a plan for paying down debt
- Build an emergency fund for rainy days
- Save and invest for retirement or your kids’ college
- Plan out your financial goals
- Understanding your spending patterns and triggers
- Stop freaking out over money
That last one is really important.
When I first became a single mom, I spent so many nights worrying about money and how I was going to pay my bills.
I was in the early stages of building my freelance business and my income was a fraction of what it is now. I had some debt to pay off and I was totally freaked out about how I was going to make it work.
Learning how to make a budget really saved me a lot of headaches. As I got into the budgeting habit, I started worrying less about money and thinking more about how I could use it as a tool to build financial security for myself and my kids.
I didn’t feel limited when I had to make a budget every month. Instead, I was able to feel in charge.
And that’s an awesome thing!
If you’re struggling to make a budget that works, I want to help you. But there’s one thing you need to know.
Budgeting isn’t a perfect process.
How to Make a Budget and Still Be Broke
When I first started budgeting regularly, I screwed up. A lot.
I didn’t always stick to my budget. As my business income started to grow I started giving in to lifestyle creep.
More money didn’t mean more problems but it did mean more spending.
I found myself doing more fun things with the kids that cost money, versus having fun for free.
I decided to splurge on cable, which added over $100 into my budget each month.
Instead of saying no every time my kids asked for a toy, I started saying yes more often than I should have.
And sometimes, I just spent money on things that I hadn’t actually budgeted for.
For example, birthdays were a problem.
You’d think I’d have remembered giving birth to my children but for some reason, I forgot to plan for things like gifts or a cake when their birthdays rolled around.
Getting my car inspected and updating my registration was another expense that always seemed to slip my mind. It never cost more than $100 but that was still $100 that I’d forgotten to add into my budget.
It was the same with buying the kids new sneakers when they outgrew their last pair or getting my son a haircut every month or covering our co-pays when I took the kids in for their checkups.
Little things, but they all added up.
In other words, I kind of sucked at budgeting in the beginning.
Luckily, I got better at it and I was able to fix the epic failure my budget had become.
And eventually, I started seeing it as a tool instead of a faceless enemy bent on destroying my soul. 🙂
That’s how I want you to see it too.
How to Make a Budget the Right Way
If you want to have a budget that works, it’s totally doable. To help you, here are the six most important steps you need to take to get there.
Step 1: Choose Your Tools
Before you can make a budget you need to have the right tools. Pick the wrong ones and you’ll probably end up hating budgeting with the white-hot intensity of a thousand suns.
So what kind of budgeting tools are there? There are four basic types:
- Money management apps
- Budgeting software programs
- Budget worksheets
- Budgeting spreadsheets
Worksheets and spreadsheets let you interact with your budget in a hands-on way.
When I first learned to budget, I wrote everything down. I liked that because it made me feel more connected to my money.
Eventually, though, I decided to switch to a money management app so I could see all my bank and investment accounts in one place.
There’s a lot to be said for budgeting and personal finance apps if you’re the tech-type.
One of the best reasons to use an app is to track your spending. You link your bank and credit card accounts to the app and all your purchases are recorded for you.
If you’d rather go old school, you can just write down what you spend each day.
It doesn’t really matter how you keep track of your spending. What counts is that you’re conscious of what you’re spending and where.
Track your spending consistently for at least a month to get a snapshot of your spending patterns.
The longer you track your purchases, the easier it is to spot your biggest money wasters.
Step 2: Start With Your Income
There are two parts to a budget: what you have coming in and what you have going out.
If you’re going to make a budget that works, you need to know exactly what you’re making each month.
This is pretty easy if you get a regular paycheck. But if you run a business or have side hustle income it might be a little harder if you don’t always know what you’re going to make from month to month.
My income is never exactly the same, so I approach the income part of my budget a little differently.
I add up the money that I know I can count on each month from my regular clients and base my budget on that. Anything above that amount is extra.
While you’re adding up your income, make a note of how often you receive it. For example, you might get paid weekly, biweekly or monthly.
Knowing when money is on its way to you is just as important as knowing how much is coming in when you’re planning your budget.
Step 3: Add Up Your Expenses
Now that you know what your income is, you’ve got to figure out what to do with it. That means digging into your expenses.
Here’s how I divvied up my spending when I first started budgeting: fixed expenses, debt repayment and non-essentials.
Fixed expenses are the boring things you have to pay for every month to live. That includes:
- Your rent or mortgage payment
- Water and electricity
- Cellphone and internet service
Debt covers what you owe to other people.
That could be student loans, credit cards, a car loan or a personal loan. Debt gets its own category because it’s not technically a need, but you still have to pay these bills every month.
That leaves non-essential expenses last. These are things that you spend money on, but you could do without if you had to.
Non-essentials are usually more wants than needs. Think expenses like:
- Eating out
- Getting your hair or nails done
- New clothes or furniture
- Kids’ activity or extracurricular fees
- Gym membership
Your list may look totally different and that’s okay. The key is to be able to separate your needs and wants, especially if you’re working with a tighter budget.
Does that mean you have to completely deprive yourself of anything you enjoy when you make a budget?
Nope. But, it’s all about making choices.
If you’re paying $100 a month for cable, ask yourself if that’s something you really need. You might decide you’d rather spend that money on something else.
The more you’re willing to scrutinize your spending choices, the more you can streamline your budget.
And a leaner budget can mean fewer meltdowns over money.
Step 4: Do the Math
So, by now you should you have your income on one side and all your expenses on the other.
Here’s where you get down to the nitty-gritty of making your budget.
Are you ready for what you have to do next? Okay, here goes: subtract your expenses from your income.
Wait…what? Is that all? Yep, it’s that simple.
Now, look at the number you got from subtracting your expenses from your income.
Is it a positive number? If so, that’s awesome. It means you’re spending less than you earn and that’s one of the keys to financial security.
But….what if you got a negative number instead?
That’s not so good because it means your expenses are higher than your income. So how do you fix it?
The obvious thing is to go back to your budget and take a closer look at your spending to see what you can cut back on.
If you’ve already tightened your budget down as much as you can, then it’s time to see what you can do on the income side.
Could you take on more hours at work or take on an part-time job?
Or could you start a money-making side gig or launch an online business to bring in some extra cash?
Even a few more bucks a month could make a big difference in your budget.
Step 5: Budget to Save
I love to save money.
Sounds crazy, right? Who wants to save when you can spend instead?
But here’s the thing, everybody needs savings for when life blows up in your face.
If you’re starting out with only cash cushion or nothing at all, then saving needs to be part of your budget. Even if it’s just $10 a week, it can add up.
But what if you’re already living on a bare-bones budget and you have nothing extra to save?
You can go back to the drawing board and see if there’s anything else you can cut out.
Selling stuff you don’t need is another way to drum up some cash. A third option (and the one I recommend) is finding ways to make more money.
I’m all about starting an online business and being your own boss from home. If you’re looking for inspiration, check out these 50+ online business ideas.
If you start making some extra money, commit to saving it. Otherwise, it could end up getting sucked up by unnecessary spending.
Step 6: Be Consistent
You can’t make a budget once then forget about.
You have to check in with your budget at least once a month to stay on top of what you’re spending and saving.
If that’s a struggle, here are a few things you can do to make budgeting a regular part of your life.
Make a regular budget date each month.
Commit to using this time to go over your expenses and income.
Set a reminder on your phone’s calendar so you don’t flake out and forget about it.
Create a positive ritual to make your monthly budget date less anxiety-inducing.
Repeat a positive money mantra, meditate on your financial goals for 10 minutes or just have a glass of wine.
Sticking with a regular warm-up routine lets your brain know that it’s time to focus on your budget.
If you prefer paper bills or statements, set up a basket or file folder for collecting them each month.
If you get electronic statements instead, set up a folder for those in your email and file them as they come in.
Treat yo self!
Did you make a budget and stick to it all month?
Sweet! Give yourself a small reward.
Having something to look forward to could give you the mental push you need to buckle down and stay on budget.
What’s Your Biggest Budgeting Challenge?
I know budgeting can be scary at first. It was for me, but now I look forward to making my budget, paying bills and watching my savings grow.
Is there something that’s keeping you from getting on the budgeting bandwagon?
Tell me about it in the comments! And I’d love it if you’d share this post with another mom who’s struggling to master her budget if it helped you