How to create a budget in 5 steps

How to create a budget in 5 steps

  • By - The Modern Day Wife
  • 22 January, 2021

Had enough feeling guilty ordering a mimosa at brunch (knowing you just checked your debit card account and it’s down to… well, let’s not even go there)? You may have noticed that this is becoming a trend, or even habit for you. Paycheck to paycheck. Never saving. Spending. Impulse buys. The whole gamut. Well, ladies & gents, it’s time to create a budget that can help you handle this! And, keep you on track regarding your spending of money. Let’s get started – open up a new excel sheet… 

Here are 5 steps on how to create a budget

1. Knowing your income 

You need to know how much money you are making each month. Add up all of your paychecks and any other type of income (for business owners who might be working two shifts to launch your company) to calculate this figure.

2. Track your spending

You need to track where your money is exactly going towards. This will help you to determine your needs versus your wants. Track down what you are buying each month. For example, here’s a real eye sore – your $5 Starbucks Latte showing up 28 times on your statement. Ladies, let’s get real. This adds up!! Or, you have a $4 membership here. $11 membership there. And so on. Again, start calculating all of this. You can track your expenses through receipts, credit card statements and bank statements. After you figure out what you've been spending, you have to separate your expenses. You may need to use such itemization categories as food, utilities, legal and professional, car lease, insurance, nutritional, medical expenses, donations, cleaning service, gas, etc. 

3. Setting a financial goal

Here is where you can put your future there. Set a goal for yourself that you know you can adhere to. This goal could be setting aside a specified amount each month no matter what. Maybe you open a life insurance account or similar type of account that enforces that you set aside $100 a month. Setting a goal helps to create a habit of saving money. 

4. Deciding to decrease spending or increase your income

Okay. You have to figure this out. Do you want to make more money – consider switching careers? Asking HR for a raise? Or, is it more do-able to decrease your spending right now. It might be a more comfortable target, you can definitely figure out how to stop spending money on items that you really don’t need. And, hey, who likes clutter? Remember that $5 latte? Skip it. Make tea at home and invest in a really great travel mug that maintains the heat of the water. And so on. Get creative. You can do this!

5. Keeping Yourself Accountable

You have to be able to stick to your budget. It’s all up to you to keep your discipline in and stick to the rules that you set in regards to spending, earning and saving. Your budget will assist you in tracking your expenses, withholding yourself from clicking “buy” on that Instagram shop, and keep to your parameters. This could take a little bit of time to maintain and keep, but you have to start somewhere. Keep yourself accountable for maintaining and following your budget and financial guidelines. It happens to the best of us, but if you want to save money, you really need to get this budget created that fits your life! 

Creating a budget is a great financial strategy that helps you understand where your money should and should not go. Try to see if these five steps can help you to better manage your money.