Writing a Budget for Beginners!

One of the questions I get asked so often is, “How do you do a budget?”

Initially, I didn’t really know how to answer this because I thought everyone did relatively the same thing. I thought that most people took a piece of paper (or spreadsheet) and wrote down what was due and kept track of everything.

Little did I know that most people do NOT do this.

A lot of people don’t even look at their checking accounts to see where they are with their money. Being that I am more of a Type A person, I have always had some sort of tracking form for my finances. Even when I was at my worst financial place, I was tracking at the very least, my monthly bills. Knowing where I was financially was important to me. I think that is why I took it so hard when I realized my spending and student loans had crept up to a point where it was putting a major strain on my life.

There were some things that I did before I educated myself (and became a Financial Coach), that I still do today. This includes keeping a spreadsheet of what I have paid (including confirmation numbers) and keeping a running balance of what I owe.

Now though, I also budget my monthly income for spending, dining out, clothing, wedding showers, birthdays, holidays, etc. Those are things I didn’t previously account for, as I was only tracking what I deemed were “bills.” This minor change has made a major difference. I now know that budgeting includes much more than just bills and I hope that you will take time to create your budget, writing down ALL money spent, and learn from my mistakes.

In addition, my day job normally requires that I travel a lot and it can be very easy to spend money when you’re away from home. A latte here or a salad there can easily create debt if done on an unscheduled and consistent basis. Therefore, I must also budget out-of-pocket business travel expenses each month, in case I incur any personal travel expenses. I carry cash for those purposes. Due to COVID, my travel expenses are minimal right now.

Also, I use cash over “swiping” my debit card because I have learned that, for me, spending real cash is felt much emotionally than swiping a debit card. Swiping leads me to overspending, as does “clicking” or online shopping. Cash allows me to control my spending and stick to my budget. It hurts so much more to turn over those dollar bills to someone else.

One of the crucial lessons budgeting has taught me is that when you are not watching your dollars, they may be easily flying out the window. You have no idea where it went. Living within your means requires that you know how MUCH your means, or income, are each month.

When I sat down and made the effort to calculate how much I was earning, I found myself saying, “You work too hard and make too much money to be this broke.” How many of you can relate? I think this can be said for someone who makes $35,000 a year or $135,000 a year. If you aren't paying attention to your money, you can be broke no matter HOW much money you make.

There are a few easy steps to creating a budget.

First, list all all of your monthly bills, expenses and include your spending money too! I also like to include the due dates, balances for each one and the minimum payment. I have included a link to a sample budget at the bottom of this post for you to see an example.

Next, I like to take a look at the dates I get paid each month. Once I have those written down, I will sort my budget by the DUE DATES for each bill or expense. This will help to give me an idea of exactly WHAT is due WHEN.

Most people will find that either the FIRST two week period of the month, or the LAST two week period of the month has more expense due than the other. To put it another way, some people will have MORE expense DUE from the 1st to the 15th of the month, while other people will have MORE expenses DUE from the 15th to the 30th of the month. It's very rare that people have an even amount due each half of the month.

For you, is the first half of the month or last half of the month have more expenses due?

Once I know which half of the month has more bills due, I then look at how much money I will receive each paycheck and what dates I will receive those paychecks on.

I will ask myself a few questions such as, "Will this first paycheck cover my expenses due for these first two weeks before I get my next paycheck?" If not, a follow up question is asked, "How much do I need to save from the previous paycheck of the month (or last paycheck of the month) to cover this two week span of expenses?" This will very specific to your particular job, bills, paydays and due dates.

Once you have this info, you can give every dollar you earn, an assignment.

You will budget out what needs to get paid each paycheck and how much needs to be saved from another paycheck to meet all of your needs for the remaining part of the month. Most people take an average of about 3 months to get their budgeting on point. If you have fluctuating income, it may take a little longer (3-6 months) than that until you get accustomed to working with a budget that varies from month to month.

Next, you will want to make a separate list of all of your debts, from smallest to largest.

This is often referred to as a Debt List or Debt Snowball. You will begin paying off the smallest debt first, paying only minimum payments on the rest and knock the smallest debt off your list. Then, you will move on to the next smallest debt. You will add what you USED to pay on the paid off debt to your minimum payment on the next smallest debt, until you knock the second smallest debt off of your list and so forth. This will help you build momentum and confidence, while also tackling your debt.

Now, it may seem more logical to aim for the debt with the highest interest rate. However, I will tell you from experience, this doesn't work. It often doesn't work because many times the highest interest rate debt is usually a larger debt, which takes more time to pay off. You end up feeling like you're getting nowhere fast. Start with the smallest and work your way through your Debt List. It works, I promise! I have also included with the FREE Budget Template, a FREE Debt List (or Debt Snowball) template for you too!

If you want to take control of your money, you need to do a monthly budget and stick to it. Take it one small step at a time.

You can do this, you just need a plan and that plan is called a Budget!

You can download my FREE Budget at the bottom of this post. Both Excel and PDF forms are available. The Excel version has the formulas programmed into it, including a sheet to create your Debt List (or Snowball). You will want to list out all of your debts from smallest to largest.

I hope this helps you get on your financial feet and gets you on the track to tackling your debt once and for all!

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