Alright folks, buckle up - because today is the day we unmask the mysteries of all things BUDGET! This post is a little longer than what I plan on my posts being - but I wanted to be detailed, so bare with me!
First and Foremost - I believe the KEY to financial success/freedom is found in creating a budget. If you’re anything like me (and as I stated in my last post) budgeting has always been an icky word . BUT I want to reframe your thinking when it comes to the word “BUDGET”.
A budget is simply YOU telling YOUR money what to do! That’s it! And you know what the coolest and most freeing thing about a budget is? YOU decide what it looks like!
Budgeting is NOT HARD. However, sticking to one, does take work! But anyone can do it and that’s why I’m writing this post. I’m just a regular ole gal who has learned the HARD WAY that if I don’t tell my money what to do', it just “disappears”.
So - Let’s get into it!
Sit down, (If you’re married, have your spouse sit down with you) and look at your bank statements from the past 2-3 months and list out ALL of your expenses. ALL OF THEM. Did you spend $153.82 at Starbucks - WRITE IT DOWN. Did you make 42 trips to Target and you’re utterly astounded at how “I’m just going to run in for paper towels and some toothpaste” turned into hundreds of dollars worth of extra purchases? WRITE THEM DOWN.
*I literally sat down with a pen and a notebook and wrote out every expense. I probably had 13-14 pages worth of spending. But you could type yours out, or print out your statements and highlight them. Whatever works for you!
This is not a shaming exercise, this is just to show yourself (and your significant other) what you’re actually spending your hard earned money on - not what you “THINK” you’re spending.
Now that you’ve listed out EVERY SINGLE EXPENSE. Categorize them. You can make up whatever categories you’d like, but these are the ones that we use: Giving, Savings, Housing, Transportation, Food, Personal, Business, Lifestyle, Health, Insurance, & Debt.
Some of those categories may not apply to you and I may not have included a category you need. This is just to give you an idea! You can have 3 categories or 53 categories, whatever works for you.
Now that you’ve categorized your expenses, calculate your monthly income. (We will talk about budgeting with irregular income, in a different post).
Now that you know how much you’ve spent and how much you make - you’ve got the perfect formula for a BUDGET!!!! That wasn’t so bad, right?!
Using the categories we came up with in STEP 2, it’s time to set up your budget! Here is an example of our monthly budget:
Any Organizations you give to
Emergency Fund (Dave Ramsey recommends having at least $1,000 in an emergency fund - for any unexpected emergencies. We will go more in depth on this, in another post.)
Sinking Funds (We will talk about these in another post!)
Household Fund (Paper Towels, Toilet Paper, Laundry detergent, etc. - I like to keep these expenses separate from our groceries - but you can lump them together if you’d like.)
Fun Money (Cliff and I each get a certain amount of fun money per month, that we can spend on whatever we want)
Kid’s Fund (Clothes, Formula, Diapers, Etc.)
BUSINESS EXPENSES (If this applies to you):
Adobe Creative Cloud
Miscellaneous Fund (we allot about $40-$50 each month to a misc. fund for unexpected things that come up - ex. friends are having a get together and you want to bring some food, unexpected doctors visit, etc.)
Netflix/Hulu/Other streaming services
Date Night (This includes Babysitter, Movies, Etc.*We don’t include eating out in this - because we already have a budget item for that)
Birthdays/Showers/etc. (If you have an upcoming birthday, baby shower, etc. include that here)
Eye Doctor Appointment (If you have a copay)
DEBT (list out any and all debts you have):
The cool thing about budgeting is that you can change it up! We go over our budget multiple times a month. We make one before the next month starts and we revisit it multiple times throughout the month - because life is unpredictable! Maybe we planned to spend $100 on groceries every week - but we ended up having to buy an extra canister of formula - we shift things around to make our money work for us!
Budgeting also takes practice. We’ve been budgeting consistently for the past 5 months and it took us about 3-4 months to REALLY get the hang of it. So give yourself some grace and celebrate the victories big and small!
I’d love to hear your thoughts, on budgeting as well as any tips you may have! I plan to talk about the methods we use to stay on top of our budget in an upcoming post -but would love to hear any feedback or suggestions you have for upcoming posts!
Thanks for reading and Happy Budgeting!