Creating Your Budget
How To Build a Budget
Managing money is intimidating, but itā€™s 100 percent doableā€”and itā€™s pretty darn necessary if you want to be in control of your dollars.
1. Figure out how you’re spending your money. Check out your expenses from last month and then categorize each transaction. Some basic categories, but definitely not all possible ones, you can start with include:
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Housing, including rent or mortgage
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Utilities
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Car payments/insurance/gas
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Health/medical expenses
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Groceries/restaurant expenses
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Entertainment
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Personal/shopping/clothing
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Children
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Savings
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Credit cards/loans/other fees
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Etc.
Categories are not limited—they should be customized to your own spending habits and responsibilities. The role of sorting is to wrap your head around where your money is going right now.
2. Calculate your total monthly income after taxes and subtract what you spent from month start to month end. Did you overspend? That’s a big red flag—you need a budget. (And, really, you need one whether you overspend or not.)
3. Analyze your spending from last month to see what categories are flexible—what can you cut back? You’ve got to pay rent on the first, but do you have to eat a Chipotle burrito bowl every week? Didn’t think so. It might help to separate your categories into essentials and nonessentials, or extras.
4. Set goals and adjust your expenses. Be realistic when you’re setting budgets for each category—you need to eat (groceries), but you probably don’t need that chevron maxi skirt (shopping/clothing).
5. Write it down as you go. You need to track your spending over the next month (and on) to understand, modify and stick to your budget. Try not to stress the first month. It takes a little time to get it down; give it at least two or three months to settle in and become habit.
6. Don’t ditch the budget after you think you know it. By sitting down each month and comparing your actual expenses to what your goals were will help you stay on track.
Additional resources from SUCCESS.com!
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16 Rich Habits
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10 Daily Habits for Millionaire-Level Success
These fundamental habits can shift everything for you.
1. Download and fill out a budget sheet.
Check out the variety of free budget template available on Mint.com. Whether you're a college student, parents with children in daycare, single-income households there is a budget template for your situation. Print out your last 3 months of bank statements and total up your spending.
2. Take the scalpel to your spending.
As mentioned above, all spending adds up. Take some time to look at your spending habits and see if there are some ways that you can either cut back or cut out completely some of your expenditures. Instead of spending $100 a month eating out, cut it to $75 and put the rest into savings or investments.