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If you’ve been asking, “How do I budget my money?” You’ve come to the right place.
If budgeting has been intimidating, overwhelming, or seemed impossible for you, I assure you; you can do it! If you’ve tried and failed, it’s OK. This time can be different! If you’re wondering where to start or how to keep going, I’ve got you covered.
Budgeting is not as hard as some people have made it sound. It comes down to a few key principles that once applied properly, you can succeed!
“How do I budget my money?” In 6 steps
But before we get into the details, I want to give you a complete budgeting pack to get started! Make sure to click below and download this as it will make such a difference:
1. Figure out your Monthly Take Home Pay
For day-to-day budgeting, you really need to know your pay after taxes and benefits. This is your useable income. If you are going to get out of debt and stay out of debt, this number is your baseline. You can never spend more than this amount if you want to live within your means. Write this number down.
If you’re income is irregular, you can still do this. Determine your minimum and maximum income and use a conservative ‘average’ to base your budget on, just to be safe. If you have extra, that month, put it in savings, or towards an extra credit card payment or house payment.
2. Write down your non-negotiable expenses
My standard is always to put giving at the top of the list. Even if you’re struggling to get by, remember that there are always those less fortunate than you. Even if it’s just a small amount, giving regularly exercises a ‘muscle of generosity’ that actually helps to reorient our entire life focus.
Beyond giving, your non-negotiable expenses are things you need to survive or you must pay:
- Utilities
- House Payment
- Groceries
- Transportation
- Phone
- Child Support/Care
- Credit Card/Loan Minimums
Total these up. This is your working bare-bones expenses number. Things like cable TV, smartphone data plans, and restaurants don’t make this list. If you find you can comfortably afford these things, that’s great! But depending on your situation, you may need to reduce those non-essentials for a time.
3. Calculate the difference between your Pay and these Expenses
After you’ve totaled up your basic expenses and your take home pay, subtract the two. This is your monthly spending limit. This difference will tell you how much you have to work with for the ‘extra’ stuff. If you don’t have enough for these basic living expenses, don’t give up! There are ways out, and there is a way to budget when you don’t have enough money.
Let’s move on to “How do I Budget my Money?” Step 4
4. Get every penny you spend inside your limit
Now that you know how much money you have left over beyond those essential expenses, it’s time to give that money a plan and put in into your budget. This is where your Cable TV and smartphone data package can fit in. But try to think of EVERYTHING that you spend money on over the course of a month.
Think about things like:
- Restaurants
- Clothes
- Coffee
- Toiletries
- Home repairs
- Extra payments on debt
- etc.
But also don’t forget to invest money in yourself. By that I mean, consider putting money towards:
- Building an emergency savings fund
- Saving for retirement
If you don’t have enough, don’t panic. You can do this.
You have two options:
1. Reduce expenses or increase your income. The simplest and fastest place I’ve found to reduce expenses is at the grocery store, and with Meal Planning. We actually have meal plans where you make 20 freezer meals for around $150 that can save you a TON of money.
There are many ways to increase your income from home. Try one of these side hustles or use these apps to make money on stuff you are already buying. Do whatever you can do to get your spending equal to or lower than your income amount.
The ultimate goal of this step is to make your monthly income minus your monthly expenses equal zero. If you have extra money even after all of the expenses you can think of, you still need to tell that money where to go. Otherwise it will just get piddled away.
5. Build budget planning into your life’s routine
My husband and I have a Budget Night scheduled on the calendar each month. This is where we plan out our expenses for the next month, before that month starts. This will ensure intentional spending, reduce surprises and, keep you within your limits. We do our Budget Night on the last Sunday of each month, and make it a major priority. It is part of our routine now, so we never schedule things on that night.
The next thing you need to do is plan a 5-minute Money check-in each morning. Use this check-in to go over what spending needs to happen that day: gas in the car, a coffee date with a friend, a lunch appointment, music lessons, school pictures, etc. If you and your spouse both have some spending to do that day, this check-in gets you both on the same page. I STRONGLY recommend using CASH in the categories where this type of spending occurs. It is one of the best ways to keep you on budget with these miscellaneous expenses.
Since most of our lives involve money, you need to be intentional with it in everyday life. I actually developed The Personal Finance Planner that merges daily life plans and goals with your finances to help do just that.
Let’s look at our last “How do I Budget my Money?” Step
6. Don’t let a trip up make you quit
No one budgets perfectly. Especially when you’re just starting. Whether it’s budgeting, basketball, or ballet, what defines success is what you do when trouble comes. Those who don’t quit are successful. If you skip a month, or start to get slack after a bit, DON’T QUIT! Jump back on the train and pick up where you left off.
A wise person once said, “Following a plan 70% of the time is better than not following any plan 100% of the time.” Try your best, get back up when you fall, and don’t quit.
You’re financial future is too important to leave it to chance. Your money will always go somewhere. You can either tell it where to go or it will tell you what to do.
Want more Tips to help answer that “How do I budget my money?” question:
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