Setting up a budget is one of the best ways to save money and learn how to better manage your finances. With a good budget, you can be in charge of how much money you spend and save which will benefit you in the long run.
How to Set Up a Budget
Setting up your first budget is not difficult. The complexity of your budget will depend largely on your financial situation. For example, someone who has one income from their job, only a few expenses, and no investments or business will have a fairly easier time setting up a budget than someone with multiple sources of incomes, many expenses, a business, and many investments.
To start, determine all of your take-home pay and expenses for a month. Calculate what you spend in a month and include everything from a pack of gum to your mortgage. You must have an exact count of what you are spending. Estimate up to avoid not budgeting enough for your expenses. Some common expenses will be:
- Mortgage or Rent
- Property Taxes (which may be included in the mortgage)
- Homeowner’s Insurance
- Cell Phone
Next, subtract your total monthly expenses from your total monthly income. This is the amount of money you have left to save. You should have a retirement account set up that withdraws this money early before you get your paycheck. This way, you don’t need to worry about this considering only your take-home pay.
Here is where you’ll determine how well you are doing. If you have no excess cash, you aren’t saving any money. If you get a negative number, you are going into debt. Even if you are saving money, you might not be saving as much as you want or need to.
Go through your expenses and categorize them. You will have a certain amount for both fixed and variable expenses. For example, allow a certain amount of money each month for your food, clothes, entertainment, mortgage, etc. Change it all around until you get what you want set up.
How to Design a Spreadsheet
A great way to design your budget is by using a spreadsheet. You don’t need to use an expensive piece of software. You can design your own spreadsheet yourself. Familiarize yourself with a good spreadsheet program first. Figure out how to design it and use formulas to make it the most efficient.
Set up a section for income and a section for expenses. List out each category along with the amount you’re allowing yourself to spend. This way, you can write down how much you spend in each category as you go each month to make sure you do not exceed what you’re allowed to spend.
Let Someone Else Design your Spreadsheet
Are you confused by spreadsheets or not interested in designing your own? There are lots of free spreadsheet templates available online that you can use for your own budget. It will allow you to build your own budget with a lot of help, which makes things much easier overall. All you have to do is customize it to your financial situation.
This is a guest post by Samantha,
Samantha has a degree in Accounting and Finance and enjoys helping people learn how to better manage their money. She also has manyideas to help you earn more cash to save.