Monthly budgets can seem so daunting and pain-full. It’s just so complicated, and where do you even start!?! I want to walk you through three key steps to creating a monthly budget. This means less debt and more money in your pocket! And if you are like me, this definitely means less stress. (double fist pump for the added bonus!)
As I’m sure you know tax season is here again! (groans) It feels like I just finished taxes for last season! This gave me the perfect opportunity to look back on last year’s finances. I was so beyond amazed at how much our financial situation has changed in just one year.
At the end of 2018, my husband and I enrolled in a Financial Peace University Course at our church. My husband did not want to attend, but it was best that both spouses be present. We finally agreed it was worth a shot.
I am an accountant and have worked in the financial field for 12 years. The things I learned in this course were just so completely different then what I had been taught in college.
Fast forward to today, I personally create a zero based budget every month. This has helped my family go from living pay check to pay check to nearly debt free in about a year. It sounds crazy to type that! It has also helped my relationship with my husband because we no longer fight about money.
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Table of Content:
1. What is a monthly budget?1.1. What is a zero based budget?
1.2. What is the purpose of a budget?
1.3. I have never done a budget is it too late for me to start?
2. What are the steps to starting a budget?
2.1. Step 1: Expenses
2.2. Step 2: Income
2.3. Step 3: Spending
What is a monthly budget?
According to Oxford Dictionary a budget is ” an estimate of income and expenditure for a set period of time.” After reading that you may be saying to yourself; Ok, so what exactly does that mean?
Plainly a budget is just a simple document that helps you plan where you will spend your money. You can have multiple budgets. If you own a business or a blog you should have a budget in place to help not only plan out your month, but also your year.
My business is this blog so for example, every year I set a max amount I can spend on my blog for the entire year. That means I have to make sure my monthly budgets will not be greater then what I have to spend this year. Nothing is worse than getting to the end of the year and realizing you have nothing left in your business account because you didn’t plan accordingly. So my monthly budget is my monthly plan.
So hypothetically if my yearly budget is lets say $2,000 then I have to make sure that whatever I spend January 1st through December 31st is not more than $2,000. Is this a realistic amount, maybe. I have ran my blog on less than that amount per year easily. This just makes you really think about your purchases and question if you need it or just want it. I have a great article on the top 6 blogging tools every beginning blogger should consider.
What is a zero based budget?
When I speak about a zero based budget I am talking about a very specific down to the last dollar type of budget. This means that every single dollar we make, I give it a name and I say where it will get spent. It is safe to say this type of budget is a control freaks dream! haha (my husbands wants me to also mention that he gets to help decide where the money goes as well LOL).
So how does that even help you? This leaves no room for mindless spending. You can’t just drop money on anything without asking yourself some questions first. Which inevitably means more moolah in your pocket! You can read more about zero based budgets here from the master of budgeting, Dave Ramsey.
What is the purpose of a budget?
Budgets are not only good for helping you pay off debt, but it also helps insure you will not go into more debt. It gives you a clear picture of where you are spending your precious resources. When my husband and I first started a zero based budget, it was scary.
I was so embarrassed that we were spending money on things we didn’t need. Seriously, we were spending over $3500 on groceries and restaurants in 1 month for a family of five! (2 adults and 3 young kids) This was crazy and only the tip of iceberg when it came to where our money was going.
After just a few short months of continually doing our monthly budget, it felt like we had gotten a pay raise without actually making any extra money! Because of this budget, we started to get a clearer picture of where our money is actually going. We knew before our money even hit our bank account, what we were getting out of each pay check. We could say where each dollar was going to go and it helped us set our expectations on more realistic goals.
Subscribe below to get access to the same printable I use each and every month to do my personal budget.
I have never done a budget is it too late for me to start?
Absolutely not!! Before we started a zero based budget we just kinda went off the fly. I mean we balanced our bank accounts and when money was low or no longer there we would look at each other, point fingers on who was at fault and then go buy an ice cream to make ourselves feel better!
Both my husband and I did budgets for work. I had a budget for my business. I even helped other businesses with their budgets and yet having a personal budget never really dawned on me.
It took us a few months to get into the hang of sitting down and doing a budget every month, but it was so worth every penny it saved us. Seriously you cannot afford to not have a plan every month!
I think no matter where you are in life, it is never too late to start a monthly budget. This will help you not only pay off any debt you may have, but also ensure you don’t go into the rabbit hole of debt. And can I say the stress it relieves! All that worrying about if you will have money for emergencies; and trust me emergencies will happen! It is just a matter of WHEN, not IF they happen.
What are the steps to starting a budget?
Step 1: Expenses
Before you begin planning your budget you need to figure out how much you are already spending each month. This is your reoccurring bills like electricity, phone, rent, groceries, credit card payments, vehicle notes, etc. Where is your money going? This step is super important, so don’t skip it!
Step 2: Income
After you see where you are spending money each month, you now need to see exactly how much money you are making each month. It doesn’t matter how much or how often you are paid.
If you don’t make the same amount each month then you need to write down your worse case scenario pay. What is the lowest you may get paid at any given month. Regardless of your situation, make sure you write this amount down.
Step 3: Spending
Now that you have how much you make, subtract how much you spend and that will give you your remaining balance.
Income – Expenses = Available Balance
You are now the proud owner of a monthly budget! Now you know how much money you have left and the fun starts. I know this isn’t a zero based budget and that is totally ok! You now know the basics of starting a budget and we will build on that knowledge in future posts. Trust me by the time we get through this financial series creating a zero based budget will be like second nature to you.
In the next few posts we will discuss where you should be spending that available balance and what your financial goals should look like. This will include paying off debt and saving money. I will also go over what to do if you realize you already spend more than you make.
I have a post you should check out on DIY Cash Envelopes. You need this and you will see why as we continue on this financial journey, more on this later. I’ll make sure to link those posts right here as they are published.
So where is the Printable you promised??
To help you get your budget started, I created a budget printable template just for you. This is the exact printable I use every month to set up my personal monthly budget. You saw pictures of it in use in this post. You can print it out every month and write in your own totals. To get access to this template and any of my other printables subscribe below:
I hope this article has given you a better idea of where to start. I look forward to helping you overcome your financial burdens and take control of your life. Post any questions in the comments below and I would be glad to help. If you don’t feel comfortable with that, shoot me an email!
Be Fearless,
Candace
