Budgeting 101: How To Build A Budget That Works

Budgeting 101
Budgeting 101

So you want to build your budget? Not just any old budget, but an effective budget, one that get’s the job done. In this budgeting 101 post, I will give you a few pointers to get you started, plus my amazing FREE e-book as my gift to you.

The first thing you want to do is track all of your spending. Some financial experts recommend that you write everything down that you spend for 30 day’s, but in my expert opinion, that is too much work. What I advise is that you pull your bank account statements for the past 90 day’s and any credit card statements as well. Review them and it will tell you exactly where your money is going.

If you are spending cash versus using your debit or credit card, then you will have to track your spending the hard way. You will have to write down everything you spend for 30 day’s. However, that would make me pull my hair out. If you must use the archaic method, then get a small notebook that you can carry with you or use the note app on your smartphone. If you pay a bill, write it down. If you buy tic tacs, write it down. Whatever you are spending cash on, write it down. My head hurts just thinking about all the writing cash only users will be doing.

What tracking your spending does, is help you get a feel for how you spend your money. It will help you develop the habit of conscious spending, meaning you will consider every purchase and how it fits into your personal financial situation. Once you have tracked your spending, you will have enough information to put together your monthly budget. Quick story, I was going over my and my husbands budget the other day. I saw where I thought we were spending too much on cable television. I don’t watch much tv but he is a tv fanatic. Anyway, our cable package consisted of every sports channel offered, when in reality all he really wanted was the SEC network. I immediately told him that we will no longer carry all these channels. I called our service provider and had our cable turned off. We are now the proud owners of a Roku box, with Netflix and Hulu and a few other paid subscriptions. That alone freed over $200 a month in our budget that can be allocated to investing. He was a tad bit angry, until he found out that he could subscribe to his beloved sports channel for $5.00 a month,

Now that you have all of your tracking information, it is time to gather it and your bills and sit down and build your budget. Don’t worry, you won’t get it right the first month, who knows, you may not get it right the second month. It will take some tweaking and some time to get it right. I have been budgeting for over 20 year’s and sometimes I mess up, but give it time, and stick with it, eventually it will pay off.

I start with a zero based budget, meaning your budget is equal to your take home pay. For example, if your take home pay is $2000 a month, then all the line items on your budget should equal $2000. The best thing’s about a zero based budget is that you can’t spend more than you make and it works for whatever amount you take home.

Budget for Everything

Include line items for anything you might think of to allocate your money to- from savings to insurance, to groceries, gas, and cosmetics.  Everything you spend money on should be included somewhere in the plan.  Don’t forget to include some discretionary money that you can use for whatever you like during the month, and to cover some expenses that just can’t be anticipated.

Also, if you pay a bill only every six months (say $600 for car insurance) then you will need to put back $100 per month as cash in an envelope or a separate bank account so you won’t be “surprised” when the bill arrives and you won’t have to scramble to get the bill paid.  Doing it this way means you’ll be prepared when the bill comes.

Now Spend The Money In The Budget?

Now that you have a written plan in place, how do you spend the money? Here’s what I do.

I pay all the bills electronically through my bank account, and check those off my spending plan.  Then I write checks for the things I don’t pay electronically (such as our tithes and offerings).  The rest of the money is left in the bank and used according to each line item i.e. groceries, restaurants, clothing, personal grooming etc,  throughout the month.

You then spend the money from each category. When the money is spent from a category, you don’t spend any more on that category, so you have to make sure to make it last. For example, if you spend all of your restaurant money in the first two weeks of the month, you will be eating at home the rest of the month.

Self Control Is The Key

Why do this? Self-control!

When you have a plan and work your plan, you are developing the self control that keeps your money situation from getting out of hand so you don’t end up spending more than you make, and when you are able to start spending less than you make, you are on track to financial freedom.

So go ahead, stop procrastinating and get started, your bank account will thank you! Don’t forget to grab my FREE e-book below for more budgeting info. Also, if you found this content helpful, please use the social share buttons below and share on your social media platforms. 

budgeting 101
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