This post may contain affiliate links which means I may receive a commission from purchases made through links. I will only recommend products I have personally used! Learn more on my private policy page.
Did you know that an estimated 67% of Americans start a budget? Can you guess how many actually stick to it? A mere 33% !
Hopefully, I’ve caught your attention, but not scared you off. Starting a budget is the easy part- maintaining it is a different story. However, it is very doable!
In today’s blog post, I’ll be going over what you need to do what starting your very first budget and stop living paycheck to paycheck!
1. Why do you want to start a budget?
The first step to starting a budget is much like when you set out to do anything, like start a blog, or plan to workout. You need to find your why.
-What’s a “why” and why do you need one?
I talk about finding your why a lot when it comes to blogging, but this idea works for a lot of things. Starting a budget is like starting a diet. It’s a lifestyle change.
When you start a budget, it can mean cutting out your favorite Starbucks drinks or not going out to eat so much.
- A way to save more money
- Reduce overspending
- Saving for the future
- Stop living paycheck to paycheck
- Achieve long-term financial goals
- pay off debt
- Stop increasing debit (i.e credit card debt)
2. Track your spending
This will give you a starting point. I’d recommend you track a full month of spending so you can get a good idea of how much money you spend. There are a few different ways you can track this
-Track your spending in a spreadsheet or notebook
Whenever you make a purchase, keep the receipt and record all of your purchases at the end of the month. Sure, receipts can be annoying, but it will be hard to remember everything you’ve bought over the month. You can write it in a notebook or on a spreadsheet.
-Use an app
I personally use the app Mint, which I like. It’s easy to track your spendings because you can just link your credit cards and bank accounts. You can create a budget straight on the app and see where you are overspending!
Some people may be a bit nervous to link their bank accounts to an app (understandably so) but I have used the app personally for a while now and haven’t had a problem!
-Use your bank statements
Credit card and bank statements can be an easy way to track your spending that doesn’t involve receipts. But, something to think about when using this method is it may be hard to remember what a specific transaction was for because some of them have unspecific names.
However, if you’re eager to start a budget right away, you can use a month or two of old bank statements to begin budgeting right away!
3. Budget for irregular expenses
In your budget, it is great to plan for things that don’t happen every month so you can be prepared. Some irregular expenses you should plan for are;
- Holidays like Christmas
- Property taxes
- Doctors visits
Make sure to pay attention to the calendar for when these expenses may come up, and plan ahead for them!
4. Add up your income
Knowing how much you’re bringing in is very important when you start a budget. Budgeting is all about splitting your income up in the smartest possible way.
Make sure to track all income including income from your job or side hustle income!
If you work from home and your income isn’t consistent, consider paying yourself a monthly “salary”. Figure out the minimum amount of money you need each month and budget around that.
When there are months where there is extra income, this should be saved for when there are less profitable months. This also helps you stay on budget.
5. Decide on personal financial goals
Deciding on your goals and things you want to save for will make it easier to budget when you have a clear idea of what you’re doing it for.
- Buying a house
- Buying a car
- Paying off debt
- Saving for college for you, or a kid
- Saving for a vacation
- Having an emergency fund
- Saving for a baby
- Saving for retirement
Once you have your goals set, you can adjust your budget to make sure you are on track to saving towards your goals.
In order to achieve your goals and make them as effective as possible you should:
- Make your goals specific: Don’t just say “Save for car” make your goal “save $1,000 for down payment on car”
- Write them down: Writing down your goals is proven to help you achieve them. Especially if you keep them where you can see them often.
- Create a deadline: When do you want to achieve this goal? Within the next 6 months? In a year? This will better help you understand how much you need to save each month to reach your goal.
6. Break down your goals
Once you have financial goals, it’s a good idea to break them down into easier to consume numbers.
Saving for a $150,000 house in 7 years sounds downright impossible. But, when you break that down yearly that’s $21,428 yearly. Still a big number.
Monthly, that would be $1,785. Which is, of course, still a big number depending on how much you make but it sounds a lot more doable than $150,000!
7. Begin writing the budget
Whew! Turns out there is alot that goes into writing a budget beforehand, and now you are at the easy part- actually writing the budget!
Here are a few things I like to consider when making my budget;
-Think about variable expenses like groceries. I usually plan for the max amount of money I will spend. That way, in case you go over, there is no problem- just extra money!
-Put some money in savings. This way, you have a better chance of getting out of the paycheck to paycheck lifestyle. This is the first thing I account for and have a small amount of my check direct deposited into another account so I don’t even miss it! Start small, like $10-20 a check!
-Don’t forget yourself! I like to leave a little bit of spending money for me. Sure, its a very small amount but at least I know I can have something for me while I’m on a budget!
Have you ever been on a budget before? Let me know in the comments below!