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Have you ever felt like no matter what you do, you can’t seem to win with money?
- Your credit card debt stays the same (or gets worse) every month
- You try to save, but something always comes up
- You live paycheck to paycheck and can’t get ahead
I get it.
Back in 2008, I was living paycheck to paycheck with no real idea HOW to get ahead.
But my Fiancé’s brother dropped a Dave Ramsey book in my lap one day, and everything changed.
I finally got on a budget!
With our budget, we have:
- Lived on $14 an hour and STILL saved money
- Enabled my wife to be a Stay At Home Mom
- Paid off over $40,000 in debt
- Grown our net worth from negative to over 6 figures
- Quit my six-figure job and traveled the country for a year (14 months later, still going!)
Without our budget, NONE of this would have been possible.
I want to pass on what I’ve learned over the past 12+ years of living on the budget and growing our wealth.
Below, I will walk you through the exact steps on HOW to start a budget today, along with a FREE budget template that you can use right from your phone!
Are you ready to start a budget and change your financial future?
Where Is Your Money Currently Going?
Before you start your budget, it’s best to find out WHERE your money has been going.
This is important for a few reasons:
- It helps you face the reality of your current spending. When you don’t know where your money is going, most of the time you don’t WANT to know. This exercise helps you overcome the first challenge of getting on a budget by being HONEST about where you are currently spending your money. Yes, it may be painful to see how all of your money is being spent, but knowledge is POWER.
- It allows you to create your budget based on REAL spending habits, not wishful thinking.
I recommend grabbing your bank statements and credit card statements, and look at your spending habits over the last 3 months. You want to go over each transaction and categorize it them into different budget categories (food, transportation, etc.).
Then total up your spending in each category and divide by 3, which will give you your average spending in each category.
Now you have a starting point, it’s time to grab your free budget template below. Then watch my step-by-step video or read below to get started.
How To Start A Budget – Video Walk-Through
Using The Budget Template
My free budget template has 4 main sections:
- Everyday Spending
- Monthly Bills
- Savings Buckets
Let’s break each of these down before filling in your budget and talk about why it’s important to segment your budget.
The top of every good budget starts with your income. To properly plan your month, you need to write down ALL sources of income for the month. This could include:
- Side Hustles
- All Other Income
Make sure you know when you are getting paid and about how much. You want this number to be as accurate as possible.
Every month is unique, so remember to update your income at the start of every month to make sure it’s all accounted for.
Once you input your total income, you now are ready to start budgeting that money.
This section of the budget is where you put all of your discretionary spending. Here are a few examples:
- Spending Cash
These are the day-to-day spending categories that are honestly the TOUGHEST to budget for.
BUT, this section is where you have the MOST CONTROL to affect the outcome of your budget.
I recommend setting a budget amount based on your previous spending (from the exercise above).
It may seem ridiculous to budget using your previous spending habits (because you want to SAVE MORE MONEY), but I can tell you from experience that trying to change your spending TOO MUCH the first few months is a disaster waiting to happen.
The goal here is to start building new money habits, and the first one is simply committing to track your spending daily with your budget.
As you get used to this, you will then start lowering your monthly expenses in these spending categories.
Money Tip: For a quick win, I recommend finding ONE category that you know you can spend less on (and that doesn’t help you with your goals), and lower it by 10%-20% of your previous spending.
The quickest win I found was to cut my Restaurant budget down by a significant amount. I learned to plan my food out better (it wasn’t perfect, but better than before), and once I got used to spending less, I moved onto another category.
This way you can build better habits (meal planning) and get used to the change instead of trying to do everything at once.
The next section is your monthly bills. These are your recurring monthly expenses and can include:
- Car Insurance
- Cell Phone
- Credit Card Payments
- Student Loan Payments
Inputting these should be fairly straightforward. But instead of just writing them down, I recommend another strategy.
When you create these categories, put the day of the month the bill is DUE after the name.
Then put them in order of when they are due.
Your Bills section should look something like this:
|Car Payment (1st)||$500.00|
|Natural Gas (8th)||$100.00|
|Car Insurance (25th)||$100.00|
|Cell Phone (26th)||$100.00|
|Credit Card 1 (27th)||$200.00|
As you can see, this gives you a snapshot of WHEN your bills are do, and lets you know how much you need during the month.
For the majority of people who are paid twice a month, you can use this information to help balance each half of the month.
For example, in the budget above, you can see the first half of the month is where a majority of the bills land. But if you don’t get paid again until the 15th, you might find yourself borrowing just to make it until your next paycheck.
Money Tip: Did you know you can call the billing department of these companies and have them CHANGE you due date? If you find yourself too heavy on one half of the month, call and move the due dates around to create a more balanced budget.
Once you input all your bills, make sure you TRULY want to keep paying for all the services you have in there.
If you have bigger goals (getting out of debt, saving for retirement, etc.), you may want to re-think things like your subscription services and memberships that don’t help you reach those goals.
You can also take a look at my post on ways to save money and see if you can lower any of your monthly bills with a simple phone call (cable, internet, cell phone are great places to start)
The last section of your budget is the Savings Buckets.
This is where you save money each month toward an infrequent expense.
These buckets are for things like:
- College Fund
- Car Maintenance
- Computer/Phone Replacement
The formula for how much to budget is pretty simple:
Total cost / # of months = monthly bucket amount
For example, if you are planning on taking a Hawaiian vacation in 1 year, you have 12 months to save. If the vacation will cost $4,000, you need to divide $4,000 by 12 months.
Doing the math, you will need to budget $334 per month into you “Vacation” bucket.
I recommend creating a separate savings account for each category so they are easier to track.
I personally use CapitalOne360, which allows you to open as many savings accounts as you want (and name them). Then I transfer money to each account to “fill the bucket”
Note: CapitalOne is currently offering a $25 bonus for signing up with THIS LINK and depositing $250.
One of the best ways to plan your buckets is to open up a calendar and think about expenses that will be coming up in the next 12 months.
Then use the formula above to save for those expenses so when the time comes, the money is already there.
How To Input Transactions – Daily Use
Congratulations, you’ve now put all your spending on paper to plan for your upcoming month!
Now it’s time to actually USE your budget to keep you on track.
Using the iHB Budget Template, I’ve built in a “Transactions” page to keep track of your spending.
On this page, you simply input every transaction when it happens (or at the end of each day).
Put in the date, amount, category and any notes on the transaction.
It’s really that simple.
The beautiful thing is that all the categories you create on the “Budget” tab are automatically available in a drop down on this page.
And after you complete the transaction, you can see what’s left in that category on the “Budget” tab under “Leftover.”
Planned vs. Actual vs Leftover
In the free budget template provided, I have 3 columns listed.
- The “Planned” column is where you actually BUDGET the money.
- The “Actual” section pulls data from your “Transactions” and shows what you are actually spending in that category.
- The “Leftover” section shows the difference between what you budgeted, and what you actually spent.
The goal is to use these columns to see how well you are sticking to the budget plan.
Money Tip: If you overspend in one category, don’t leave it negative. BORROW money from another category to cover the difference. This is how budgeting works. You don’t spend money you don’t have; you get creative and MAKE IT WORK!
As you enter your transactions, make sure to keep an eye on your “Leftover” column to avoid overspending.
What To Do Next
Now that you have built your budget, you need to plan out what to do with your “Monthly Savings” at the end of each month.
I always recommend starting by building your Emergency Fund before tackling any other goals.
Next, go grab a copy of my Debt Snowball Spreadsheet and speed up your debt payoff!
Then make sure you are saving toward something you REALLY care about.
You won’t stick to a budget that doesn’t help you live a better life, so define what that looks like to you, write down those goals, and put your money there!
If you need any more ideas on what to do next, I recommend reading through my 5 Steps To Financial Freedom. I walk through exactly how to achieve freedom with your money to enjoy building a life you want!
What If I Don’t Have Enough?
If you build your budget and the “Monthly Savings” number at the top is RED (negative number), DO NOT PANIC!
Breathe deeply, and know that it’s O.K. to see a negative number at the top.
This is exactly what this budget is built for, to help you see EXACTLY where your money is going, and to help you CHANGE your spending to get you ahead.
If you don’t have enough money at the end of the month, you can simply change the budget.
Ok, let me put it another way.
There are things you can’t change. You need food, shelter, utilities, and transportation to keep your life going. Outside of that, most everything in your budget is negotiable.
Simply keep the NON-NEGOTIABLE items in the budget, and then start adding in the other spending, one-by-one, in order of importance.
Once the budget reaches “0”, then nothing else can go in there.
But no, it’s not easy.
Note: If you adjust to a bare minimum and there’s still a shortage, you will need to consider ways to make more money, or lower your core expenses (moving, riding the bus, etc.)
You CAN do this, and it is WORTH IT!
3 Money Tips To Help You Succeed
Well done! You’ve completed the first step to taking back control of your money.
You have the power of knowledge through tracking your spending, the power of a plan with your new budget, and the power of Priority Based Spending to continue spending on what you enjoy and saving money at the same time!
And now that you’ve learned how to start a budget, it’s time to execute on the plan you’ve put together.
Here are 3 budgeting tips that I’ve learned to help you STAY ON TRACK and hit your goals!
1) Expect Failure
Your first 3 months of budgeting may feel like failure. Life has a way of messing up our plans, so expect your budget to fail. You can’t account for everything, but don’t stop budgeting just because you blow it.
It takes more than 1 month to get into the groove, so keep punching in your spending and it will become a habit in no time!
2) Check In Weekly
When you first get on a budget, keeping track of your spending won’t feel natural. You may forget to record your transactions, your plans may change, and you might feel like you can’t keep up.
That’s totally normal.
Put time on the calendar (Sunday evening works well) to do a quick budget “check in”, get caught up, and make sure you’re ready for the upcoming week.
Don’t worry, your budget will become more automatic and you’ll turn these into monthly check ins. But for the first few months, check in every week to stay on track.
3) Write Down Your WHY
Sticking to a budget is hard if you don’t have a compelling “WHY”. If you are not saving money for a reason, then any minor difficulty will cause you to throw in the towel and give up.
For me, I always have a picture of my family on my phone and computer background. They are my “WHY.” Just a quick glance makes it EASY to remember why I am working so hard, why it is SO important to manage our money well, and why sticking to the budget matters.
I also create BIG goals that are far more exciting than any financial temptation. When our budget is tight, daily lattes or snacks at the gas station (Doritos are my weakness, see my About page) aren’t even on my radar.
I’ve got bigger dreams.
Write down a few of your BIG goals, make them your phone and computer background, and always be reminded of your “WHY.” This will eliminate the temptation to blow the budget, and keep you motivated to improve your finances even more!
Check Your Email
Now that you’ve put your budget on paper, it’s time to put in the work!
If you downloaded the Free Budget Template, you’ll now get (at least) a weekly email from me, keeping you on track with budgeting tips, ways to save money, and step by step guides on getting out of debt and building REAL wealth.
Stay in touch, and feel free to drop me a note on Instagram (where I post daily).
I’m excited to have you on board, and want to see YOU succeed in money, and in life.