How to Create a Budget (and actually stick to it)

Before you get sweaty palms and a stress headache, take a deep breath, and stick with us. This is the first of many budgeting blogs to come, and we’re starting with the basics. The good news? Creating a monthly budget is easy to do, and we’re here to walk you through it.

Before we start, you’ll want to slightly underestimate your income and overestimate your expenses. That way, you get a little extra padding in your savings for the unexpected stuff. This is especially smart if your income fluctuates from tips or commission.

Speaking of pay, if you get paid weekly or your paycheck is based on tips/commission, you may have to do a little tweaking here.

Now, let’s get back to better budgeting. (And remember, like any new routine or practice, it takes a while for it to become second nature, so don’t get frustrated!)

Breaking Down “Needs”

First, make a list of your needs that remain the same from month to month. This includes rent, car insurance, health insurance, phone bills, car payments, personal loan payments, daycare payments, etc. Enter those needs into a spreadsheet.

Next, jot down your monthly expenses that DO change: food, electricity, gas — anything that isn’t a fixed price. Food is a biggie! To estimate what you spend on groceries, look at the last three months of your grocery bill + restaurant expenses. Look through online bank statements or receipts (if you have them) and total them all together. Divide by three, and you have your average monthly food “bill.”

Last, take another look at your phone bill. Don’t be afraid to shop around to look for better deals. Often carriers have awesome introductory pricing for new customers (Can you say free new cell phone?!).

Things to Reevaluate
We all need a little spending check-in from time to time to see where we can trim a few expenses. If you have a large family, will shopping in bulk save money down the road? Alternatively, do you buy too much food and end up throwing half of it away? Meal prepping could help you only buy what you need, and a membership at a warehouse-type store could save you big over the course of a year.

When it comes to rent, you want to make sure it doesn’t exceed 30% of your household income. If it does, a new place might be a smart decision. We know moving is never fun, but it’s one way to make a huge impact on your monthly (and yearly!) spending.

What about car insurance? When your plan is nearing renewal time, shop around to see if you can find a better rate. Some companies offer deals if you bundle your home/renters insurance with your auto insurance. So be sure to ask about those options!

Wants (AKA, the fun stuff)

Enter all the items that don’t qualify as needs into your spreadsheet. This includes entertainment, dining out, shopping trips, all that kind of stuff. Streaming services, game subscriptions, and music all add up.

Let’s check out your online bank statements again – see a few subscriptions you forgot you even had? Hey, it happens to the best of us. Take a minute to do a little purging. Maybe you got Hulu or Netflix for a specific series, and now that it’s over, it’s time to pause your subscription.

We know it’s easier than ever to rent and order practically everything through your TV or phone apps, but that convenience adds up fast. A little entertainment tip? Local libraries are full of movies, shows, books, audiobooks and even museum and zoo passes…all for FREE.

Also, don’t afraid to be honest with yourself. When little indulgences start becoming a routine, it might be time to cut back. From those delicious but overpriced lattes to buying the newest video game(s) as soon as they hit the shelf, there are tons of ways to do so. Try choosing one day a week to treat yourself to a fancy coffee, so it becomes more of a reward. And if you wait a few weeks after a video game comes out, you may be able to find it used for half the price! If you have other tips that have helped you easily cut back, leave a comment!

Saving Made Easy(er)

Don’t forget about the most important part of your budget —saving. While it’s not the most instantly gratifying, think of saving as insurance for future you. You never know when unexpected expenses or emergencies will strike. In a perfect world, 20% of each paycheck would go into your savings account. We know things are far from perfect right now, but the more you can save, the better.

While spreadsheets may seem scary, we promise they’re a great tool for inputting all of your information and looking at it from a bird’s eye view. And be sure to keep an eye out for the next budgeting blog, which will focus on 50/30/20 spending in more detail!

Hungry for more savings and budgeting tips? MoneySKILL offers a free course for you to brush up on managing your finances. Here’s to getting back to good spending (and saving!).

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