Do you sometimes forget to pay bills and then find out you now have to pay the bill plus late fees and interest? Are you often struggling with running out of money a few days before payday? Does it seem impossible for you to ever find enough money to save for taking a much-needed vacation, purchasing your first home or simply having extra funds to cover for unexpected emergencies? If so, then you most definitely need to create a budget to help yourself to get and stay on track with your financial goals.
Creating a budget is a very essential step to becoming financially successful. Creating a budget will help you to stay on task with what has to be paid each month, in addition to allowing for vacations, savings accounts and more. A budget consists of all essential and current bills such as mortgage/rent, utilities, phone/internet, groceries, food, credit cards, entertainment, clothing and more, in addition to planning for the things you would like to have in the future. Without a sound budget, it is almost impossible to succeed financially and reach your goals. Since budgeting doesn’t have to be complicated, I would like to provide some easy tips and instructions on creating your first simple budget.
To create a simple budget, you will need a few office supplies, a table or office space and a little thinking time. These items include a computer, calculator, pencil or pen, notepad, a list of your current bills, amount of your current net pay and thoughts on desired future savings and investments. If you do not yet have the means to a computer, which can be incorporated into your budget as a future want, then the rest of essential items will suffice for now.
Brainstorm Musts and Wants
Once you have acquired the above short list of supplies, the best way to get started on a simple budget is to take a notepad and pencil and start jotting down all of your current bills and their monthly amounts, what I call The Musts. The Musts list will include all of your current necessary bills and other debt that you are already obligated to pay.
- Mortgage or Rent
- Insurance (Auto & Home)
- Home/Auto Maintenance & Taxes
- Children(s)’ Sports and Other Activities
- Health/Fitness (such as gym memberships)
- Holiday & Birthday Gifts/Parties
Once you have The Musts list created, create a second list called The Wants. The Wants list will include anything that you do not currently pay or save for but would like to.
- Entertainment (Eating out, Going to Movies, etc.)
- Emergency Savings Plan
- Long-Term Savings Plan
- Purchasing a Home
- Buying an Investment Property
- Education (You or your children)
Once you have gathered your supplies and brainstormed on your Musts and Wants, you are now ready to complete the final draft of your budget. I am attaching below my own personally created Simple Household Budget template for an easy way to get started. For those of you who have no idea how to use Excel, you can create this same budget on a notepad, using a ruler and pencil to make it look the same. Add in any additional categories that suit your financial situation.
When creating your budget, first list all of The Must items. Then look at the remaining amount left over after monthly net income minus expenses. This will then help you to start adding and creating The Wants list. All you have to do is determine which Want items are top priority and how much you would like to add as a monthly amount. I would suggest creating an emergency savings account first, paying off all debt, then moving on to all the rest.
Creating and maintaining a budget does not have to be difficult and is one of the most important things you can do to plan for your financial success. If you find, after computing your monthly income less expenses, that you are in the negative with no additional funds to even begin planning The Wants list, I would suggest focusing only on The Musts list for now. Forget about The Wants and focus on how to either earn more income or reduce your current bills so that you are living within your means. The ultimate goal here is to see a positive number with your current bills and debt. The rest will then begin to be possible and fall into place.
“People sometimes forget about using their savings account as a simple but powerful tool in staying on track with their budget. It’s often a free benefit with many banking institutions, and you can set up multiple savings accounts for automatic deposits to handle your Musts, your Wants, and your Emergency Funds. Shopping around and negotiating is also strongly encouraged. Online banking has made the personal banking world very competitive; allowing the consumer to hold the cards when discussing any add-on fees or yearly rates with your bank or credit union.”