Lets Create Your First Budget!
If you want to take charge over your finances a budget is key. Don’t think of a budget as a restricting measure, because its not. A budget is just a blue print of where you want your money to go. It’s a list of your priorities, thats it. This is a living document you can change it as the month progresses. It took me three months before I was able to successfully project my monthly spending.
I’m going to walk you through my favorite budgeting app, Everydollar.com. If you want to find a different one please click on the hyper link above (my favorite budgeting app) for more ideas.
Step One: Gather your bank statements and/or credit card statements
In this step you want to gather last months bank statements. If you spend money out of more than one account, i.e. credit card, then you’ll multiple statements. We are going to need to have these detailed statements in order to find out where the money went. Don’t worry your first budget will not be perfect, meaning you’ll probably be way off on your projections, you will get better over time.
Step Two: Grab a calculator, it’s time to do some simple addition.
Now, you are going to go through the statements and start adding up items to put in your budget. You’ll add up all the purchases of gasoline for your car, all your store purchases for food, all your out to eat purchases, etc. You’ll lump all these together to input into our budget for the upcoming month. Adding up store purchases for the food category could be tricky. Because if your like me and shop at Target you might have bought clothes or some other non food item, unless you have the receipts you would have no idea. No need to worry. We are ball parking in the first month and you can adjust the amounts as you see fit.
Step Three: Log onto Everydollar.com to create your account.
EveryDollar is a Dave Ramsey product that is free! You can pay to have your purchases inputed directly from your bank account and its $10.00 a month. I choose to do the free options and input it myself. By inputting it myself I save $120 a year. Its your call on choosing the paid versus free, but I’ll always opt for FREE.
Step Four: Input how much your net income will be for the month.
This budgeting tool is great because it starts from the top with income. In the income section I add in my take home pay, meaning the amount that actually hits your bank account. This keeps the budget simple so your not having to factor in taxes or anything. For me this amount each month never changes, but if you have sporadic paychecks I would recommend putting a number you know you’ll ALWAYS get paid. By putting the minimum guaranteed number you’ll live on a smaller budget which will set you up for success when you have those months with huge paychecks, giving you the opportunity to pay down debt or save.
Step Five: Input how much you’ll be giving for the month.
It is at your discretion how much you’ll be giving every month. Full disclosure Emily and I don’t hit the tithing number (10%) every month, but we do give in the form of our time. This is an area we need to work on, but remember giving is like be on a plane that is crashing. Put your air mask on before you start helping others. If you’re drowning in debt it might be time to stop giving financially and focus on paying off the debt as fast as possible. And instead of donating money donate time.
Step Six: Input how much you’ll be saving.
If you’re getting out of debt this number should be zero! You want to throw every dollar at the debt at this point in time, as long as you have $1,000 in the bank as a starter emergency fund. Other wise use this saving section to get to your first $1,000.
Step Seven: It’s time to track your housing expenses.
In this section you’ll include your mortgage, rent, utilities, home owners association fees, etc.
Step Eight: Transportation expenses.
Here you are going to log expenses such as gas, new tires, and other maintenance items.
Step Nine: Food.
I put two thing in this category, restaurant spending and groceries. This section will blow your mind! It blew my mind was blown when I found out how much we were spending at Target on groceries. Once we realized how much was going to Target we switched to shopping at Aldi’s for groceries.
Step Ten: Lifestyle expenses.
This is everything you spend on your life. This includes cable, cell phones, internet, magazine subscriptions, association dues, etc.
Step Eleven: Insurance expenses.
Everything insurance goes into this bucket. This includes health, dental, life, and auto insurance. In addition, if you rent you should have renters insurance and if you have a home homeowners insurance.
Step Twelve: All debt payments except for your mortgage.
All your loan payments will go into this section. The debt section might be a little scary but rest assured that you are no on track to tackling each and everyone of these payments.
Congratulations you’re done!
You’ve created your first budget. The end result should be zero left at the end of the month because every dollar has been accounted for. If you do have money left over that is great as well. Because you can use this remaining number and apply it to your debt payments. Or if you’re debt free it can now be earmarked to savings. You always want your budget to sum to zero, because this means you have plans with your money. Any extra money you don’t account for will only be wasted on things you were planning on spending money on, be intentional with your hard earned cash!
If you look to the right of EveryDollar there is a cool graph section that shows you how your budget breaks down in each category. This is for all the nerdy people who like that kind of stuff.
I hope this post helped and please message below if it did. Also, if it did please share it with someone who can benefit from setting up their first budget. To learn more about Dave Ramsey I recommend you read his book the “Total Money Make Over”. This book will teach you how to pay off your debt and stay out of debt! Click on it below.