How to Make a Budget & Stick to It!
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One of the most important aspects of improving your financial situation is to create a budget. However, it can be very intimidating to make a budget for the first time. It can be even harder to stick to it. I have included some basic steps on how to make a budget and stick to it.
I have always had some form of a written budget. But when I was still figuring out this whole being an adult thing, I wasn’t very good at it. I even forgot to make some payments on time because I didn’t write down when they were due. There were even times, I completely forgot to pay a bill because I didn’t write it down. I quickly learned that I didn’t like to (and couldn’t afford to) pay higher interest and late fees, so I wrote down on my calendar when everything was due. I got better at it with practice and made all my payments on time. When I discovered Dave Ramsey and read The Total Money Makeover, I learned about a zero-based budget. Basically, you assign every dollar a job. Instead of having money left at the end of the month (on paper anyway), you account for every dollar going to something. This was very hard for me at first and seemed tedious but it was so worth it.
Step 1: A Written Budget
The first thing to do is to WRITE IT DOWN! This is crucial for making a budget and increases your chances of sticking to it. The first thing to figure out is how much income should be coming in for the month. It is crazy how many people don’t know how much money they make. Once you figure out what your income is, it is time to figure out where all your money is going.
While you are creating your first budget, I suggest going through the last 2-3 months of bank statements. This should give you a good starting point of what you need to budget for certain things like food and gas. Write down all your bills; rent/mortgage, TV, phone, insurance, power, water, internet, debt payments, food, gas and anything else that comes out monthly. You will also need to figure out when to pay which bill. What I do is break my monthly budget up into paychecks. So, I set aside money at the beginning of the month for bills that come due in the middle and end of the month. I then pay bills that come in at the end and into the following month with the middle to end of the month paychecks. For example, my February mortgage payment is taken out of January’s income.
If you are behind on bills, it is going to take some time to get caught up and then ahead on some items like your rent/mortgage. This is where selling items or getting an extra job come in. I talk about some of those things in my post about paying off debt quick.
Step 2: Prioritize Spending
The next step is to prioritize your spending. This is especially important if you have irregular income or don’t have enough income to pay all your bills. The first thing you pay out of your paycheck is FOOD. The next things are power, water, and then rent/mortgage. Then comes transportation costs, like your car payment, insurance, and gas. Next is phone, internet, and then debt payments. Personally, you can switch phone, and internet with debt payments if you want. That depends on what is needed for work and what you are willing to sacrifice. If you work at home and have to have internet and/or a phone, then move those up the list in priority. Either way, debt payments never come before food and other necessities.
This is not an all-inclusive list, but these items are generally priorities. If you have money left over, start saving for things that you know are coming up that you can’t cash flow right away, like taxes, doctor co-pays, vehicle maintenance, clothing and things like that. Make a list of everything in order of importance and focus on what you can. Keep in mind that if you get paid bi-weekly, you have 2 extra paychecks a year, 4 if you are married and both are paid bi-weekly. That is a good opportunity to fund some of the things that aren’t needed every month.
Now, with all that said, you do not have to actual write this down every month on paper. I would suggest writing it down on paper at first to get a real feel for where your money is going. After that you can use an app or spreadsheet to keep track of things. There are several apps out there, Mint, YNAB, and Every Dollar. I’m sure there are more but these are the ones that I have heard of. I am not endorsing any of them, it is up to you to see what you like.
Step 3: Stick to it
Ok, you have your budget written down with your income and bills, now what? Well the next step is to stick to it. It is going to be rough the first couple of months. You may over budget some things and under budget others. It is important during this time to give yourself some grace. No one is perfect even when it comes to budgeting. However, it does get easier with time and practice just like anything else.
The most important part of sticking to the budget (besides writing it down) is having an accountability partner. If you are married, you should be doing this with your spouse. If you are single, tell a friend what you are doing and ask them to hold you accountable. Either way, tell some close friends what you are doing so they can support you. You may even find that you inspire them to start this journey with you. I found that by telling my friends what we were doing, they were supportive and inspired to start their own debt-free journey. By telling your friends what you are doing, it can make it easier if you don’t have money to do certain things, like eat out or go on a trip. Hopefully, your friends will understand and be supportive of your journey.
The other almost as equally important part to sticking to your budget is using cash. Using cash has a different feeling than swiping a card. You actually spend less when using cash. Using cash makes it easier to stick to your budget because once it’s gone, it’s gone. The idea is to quit spending once the cash is gone in a certain category. Now, something may come up and you may have to move money from one category to another but this shouldn’t happen all the time. If it does happen a lot, it is time to re-evaluate your priorities and re-think how much you are putting in each category. You don’t have to use cash for everything, like paying bills. I mainly use cash for things that I would have to go to a store to buy, like food, clothes, hair cuts, and things like that. I don’t use cash for things like gas, utilities, mortgage payments, and things that are easier to pay online and that I would want a paper trail for.
For some FREE budget spreadsheet templates check out my files page.
Now it’s time to get started! Just remember, progress is progress, no matter how slow.
If you enjoyed this post, like, share, or comment! I look forward to hearing from you about your journey and any questions you may have.