Do you ever find yourself wondering where all your money went at the end of the month? Or perhaps you want to start saving for something special but don’t know where to begin? Don’t worry, you’re not alone. Creating a budget might sound intimidating, but it’s actually a straightforward process that can help you take control of your finances and achieve your financial goals. In this guide, we’ll walk you through the steps of creating a simple budget, even if you’re not a finance expert.
Step 1: Calculate Your Income
- Make a list of all your sources of income, including your salary, freelance work, side hustles, and any other money you receive regularly.
- Add up the total amount of money you earn in a month. This will be your total monthly income.
Step 2: Track Your Expenses
- Keep track of all your expenses for a month. This includes everything from rent/mortgage payments, utilities, groceries, transportation, entertainment, and any other purchases you make.
- Use a notebook, spreadsheet, or budgeting app to record your expenses. Be sure to categorize them so you can see where your money is going.
Step 3: Calculate Your Total Expenses
- Add up all your expenses to find your total monthly expenses.
Step 4: Set Your Financial Goals
- Determine what you want to achieve with your money. Whether it’s saving for a vacation, paying off debt, or building an emergency fund, having clear goals will help you stay motivated.
- Write down your financial goals and how much money you’ll need to achieve them.
Step 5: Create Your Budget
- Subtract your total monthly expenses from your total monthly income to see if you have a surplus or a deficit.
- If you have a surplus, allocate that extra money toward your financial goals or savings.
- If you have a deficit, look for areas where you can cut back on spending to balance your budget.
Step 6: Monitor and Adjust Your Budget
- Review your budget regularly to track your progress and make any necessary adjustments.
- Be flexible and willing to make changes as your financial situation evolves.
- Celebrate your successes along the way, no matter how small they may seem.
Meet Jane
Now, let’s walk through the steps using an example to ensure the concepts truly resonate.
Step 1: Calculate Your Income
- Jane works full-time as a marketing assistant, earning $2,800 per month.
- She also earns extra income from dog walking, bringing in an additional $200 per month.
- Jane’s total monthly income is $2,800 (salary) + $200 (dog walking income) = $3,000.
Step 2: Track Your Expenses
- Jane keeps track of all her expenses for a month using a budgeting app on her phone.
- She records her rent ($1,400), utilities ($150), groceries ($300), car payment ($250), car insurance ($150), dining out ($100), entertainment ($300), phone bill ($50), and internet bill ($50).
Step 3: Calculate Your Total Expenses
- Jane adds up all her expenses: $1,400 + $150 + $300 + $250 + $150 + $100 + $300 + $50 + $50 = $2,750.
Step 4: Set Your Financial Goals
- Jane wants to save $100 each month for an emergency fund.
- She also wants to save $50 each month for a future vacation.
Step 5: Create Your Budget
- Jane subtracts her total expenses ($2,750) from her total income ($3,000): $3,000 – $2,750 = $250.
- With a surplus of $250, Jane decides to allocate $100 to her emergency fund and $50 to her vacation fund, leaving her with an extra $100.
Step 6: Monitor and Adjust Your Budget
- Jane regularly checks her budgeting app to track her spending and progress toward her financial goals.
- If she notices she’s overspending in certain categories, like dining out, she adjusts her budget by reducing that spending and reallocating the money to her savings goals.
Outcome:
By following these steps, Jane has created a budget that leaves her with a surplus of $250, allowing her to allocate some money towards her financial goals while still having a small cushion for unexpected expenses. This budget helps her stay on track financially and work towards her long-term objectives.
Janes budget
| Category | Monthly Amount |
|---|---|
| Income | |
| Salary | $2,800 |
| Dog Walking | $200 |
| Total Income | $3,000 |
| Expenses | |
| Rent | $1,400 |
| Utilities | $150 |
| Groceries | $300 |
| Car Payment | $250 |
| Car Insurance | $150 |
| Dining Out | $100 |
| Entertainment | $300 |
| Phone Bill | $50 |
| Internet Bill | $50 |
| Total Expenses | $2,750 |
| Surplus | |
| Emergency Fund | $100 |
| Vacation Fund | $50 |
| Extra | $100 |
Conclusion
Creating a budget doesn’t have to be complicated or overwhelming. By following these simple steps and staying committed to your financial goals, you can take control of your money and build a brighter financial future for yourself. Remember, it’s never too late to start managing your money wisely!
