So you’ve decided to do things differently this year. In 2017, you’re going to be smarter with your money. You’ve made up your mind to create a budget and stick to it.
Three cheers for YOU! Building a budget is a very wise decision and the first step in your journey to becoming “financially fit.”
Now, how do you get started? Creating a budget is actually easier than you think, especially when you break it down into bite sized pieces.
Track Your Expenses
Does cash just seem to disappear out of your wallet? You’re not alone! So is some super villain pick pocket guy out there swiping all your hard earned dough? The truth is much less dramatic.
Spending money is not memorable. After all, you’re not taking selfies every time you check out at the cash register. (Or, at least we hope not!) Set aside at least two weeks to track your expenses. Save your receipts or check your online banking history daily. What you discover will probably surprise you! You may even notice several areas where you can cut back.
Put it on Paper
… Or on a spreadsheet, the notes on your phone, or an app. The point is – when you commit to “writing” out your budget in a place where you can see it, you are much more likely to stick to it. Think of it as marching orders for your money. You should be telling it how to work for you, not the other way around.
Break it Down
Budgeting is way less intimidating when you break it down into categories:
Income
First things first! Before you can tell your money where to go, how much do you have to spend? How much are you bringing home with your paycheck? Do you have any side hustles or hobbies that help supplement your income?
Fixed Expenses
Items like rent, cable, student loan payments, or even Netflix. These bills are due monthly and cost the same amount each time.
Tip: Saving for emergencies or goals should become a fixed expense in your budget if it isn’t already. It’s called paying yourself first – and it doesn’t have to be difficult! Pick an amount that you will save each time you get paid. Sign up for direct deposit or auto transfer, so it automatically drafts into your savings account each time you get your paycheck. You’ll have a nice-sized nest egg before you even realize it!
Why save before you even pay your bills? Because you’ll be tempted to wait until the end of your pay period, and more often than not, the money won’t be there.
Variable Expenses
These are regular expenses like gas, groceries, electricity, etc. that you pay frequently, but the cost is different each time.
When attempting to budget for your variable expenses, try figuring out the average cost of these items. It’s ok if you don’t get it perfect the first time. Remember, budgeting (like many things in life) is a process.
Periodic Expenses
This is one of the categories of your budget that really keeps you from getting blindsided. There are certain events in your life that happen a few times a year, but it’s important to save for them. Think doctor visits, car insurance, Christmas, or birthdays. If you’re not prepared to pay for these events, it can really kill your cash flow. But, if you build them into your budget, it will be smooth sailing.
Keep Growing & Changing
Change is uncomfortable! But, guess what? That’s life! A year from now, your life could look completely different – and so should your budget. Your budget should grow with you.
It takes practice! So, don’t get discouraged. If you’re budget doesn’t work our very well once month, or you overspend, give yourself a little grace. Jump back in the game and keep on going.
Whatever changes you’re trying to make this year, be flexible! Life isn’t perfect. You’re going to make mistakes, but don’t let this derail you. Figure out what went wrong, dust yourself off, and try again. That’s how you form healthy habits that stick!
How DuGood Can Help
Ready to build a budget that works for you, but still need a little help? We have several solutions to help you get started!
Give us a call or email us about scheduling a little FREE financial education. We can sit down with you one-on-one and help you figure things out. You’ll be a budgeting guru before you know it.
