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Is learning how to make a budget your idea of a good time?
Yeah, I didn’t think so.
And it’s not just you. Almost 30% of Americans think they don’t need a budget at all.
But you do if you want to have control over your money.
The good news is, it’s pretty easy to make a budget. The bad news is, it’s hard to stick to one.
After all, watching how you spend 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 that’s not what managing your money is really about. And if you’re totally in the dark about budgeting, 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
What is a budget?
Well, it’s just 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 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: My Money Story
When I first started budgeting regularly, I screwed up. A lot.
I didn’t always stick to my budget. As my business grew 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 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. (And if you need some spreadsheets to help you out, grab my free budget bundle!)
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 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 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 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.
Use Trim to cut spending even more
You might think you’ve covered all the bases with cutting expenses but you could be missing some smaller costs or here or there that could be draining cash from your budget.
Enter the Trim Financial Manager.
Trim reviews your spending and:
- Cancels old subscriptions
- Sets spending alerts so you can track expenses
- Helps you negotiate and lower your bills
- Fights fees charged by your bank
It’s a hassle-free way to cut out the fat as you make your budget and help you start saving money automatically.
The best part? It’s completely FREE to start saving money with Trim. So go sign up if you haven’t yet!
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 a part-time job?
Even a few more bucks a month could make a big difference in your budget. And if you want to start a blog, check out my step by step tutorial for hosting your blog with Siteground!
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 with only a small 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.
An easy way to make sure you’re growing savings consistently is to automate it with an app. My personal fave for saving extra cash is Digit.
With Digit, you link up your bank account to your Digit account. The app tracks your spending habits and gauges a safe amount you put into savings.
The app then automatically sweeps that money into a savings account for you. It’s a super-easy way to start building savings, even if you feel broke.
Over 1 billion people are saving money with Digit so it’s worth a try if you’ve struggled to save up until now. Use my special link to open your account and try Digit free for 30 days! (After that, it’s just $5/month.)
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.
Now over to you — 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 if it helped you!