3 Simple Steps To Create Your Perfect Budget

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1. Write Down All of Your Expenses

The most important step when creating a budget is to write down every expense you will need to pay for that month. That includes bills, Birthday presents, field trips, car inspection, food, gas and more.

Go through each day of the month ahead and look at the activities coming up. It is important to write down anything you will need to buy that is not on your normal food, water, or bills list. By doing this you help stop those annoying random expenses that pop up and can throw off your budget.

As you get more accustomed to writing everything down it will be easier to plan ahead and know what each thing costs from month to month.

2. Prioritize What Matters

Prioritizing is so very important. The first things that should come out of your budget should always, always be necessities to living. These would be food, water, shelter and transportation. After these expenses everything else is secondary.

If you run out of money before reaching the bottom of the list then you have at least gotten the most important expenses for the month. This is SO helpful in feeling at peace that you will at the very least make it to the end of the month fed, have a roof over your head and able to get places.

Here is an example of how Paul and I prioritize what is most important for us.

1. Shelter — rent, mortgage

2. Food — What you buy at the grocery store. This does not include going out to eat.

3. Bills — electric, heat, water, car, phone

4. Gas for your car.

5. Medical — prescriptions, doctor visits

6. Laundry –We go to the laundry mat.

7. Debt — This is the first expense after the necessities of life that we like to pay for. By putting our money on debt first we are prioritizing it in a way that it matters to us more than other things like entertainment or new clothes.

8. Entertainment — eating out, Hulu, gym membership, movies, cable

9. DIY — The fund we use to buy materials for projects.

10. Clothing

3. Stick To It! Adjust When Needed. 

Sticking to your budget is essential! If you are trying to live within your means you need to stick to what you set out for the month to spend in each category.

This means that you need discipline…which can be hard at times! But just because you see a cute pair of shoes on sale does not mean it is a necessity. If you have budgeted for the expense then by all means get those new shoes, but if not it is more important to be diligent with your finances than to buy something on a whim.

Also, the only way to have a perfect budget is one that is adjustable. Yes, that might sound counterproductive but it is important to have leeway in the budget you create.

When it comes to expenses in the budget that are flexible like entertainment, clothing, or whatever is important in your life these need to be flexible to change. Doing so allows you to add or subtract in different areas to ‘help out’ an area where you misjudged the amount you needed to spend.

The whole point of the budget is to stay on track for only the expenses you have for the month. Not what you have plus whatever you are willing to put on a credit card.

When you allow some leeway in your budget you are able to cover the costs from one area to ‘fix’ another area that you overspent in.

For example: This month Paul and I overspent in our laundry budget because we unexpectedly needed to take a couple of his suits to the dry cleaner. That is OK though, because we were able to pull in extra money from the entertainment allotment to cover the costs.

For more on budgeting here is another post I have written: Tracking Expenses with Google Speadsheets

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I hope this post helped you if you are struggling to create the perfect budget!

 

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