Starting your budget over again? Wondering why your budget isn’t working? When in the world will you be able to get ahead?
About five years ago my hubby and I would find us wondering the same things ever single time we got paid.
Living paycheck to paycheck was getting exhausting and it felt like we would never be able to claw our way out of the endless money pit we were sinking in.
We were tired of starting over again and again with a “budget”. Eventually we figured out what our problem was and maybe you are having the same issue.
Do you really know how to start a budget that is customized to your personal finances?
We kept trying to copy exactly what we saw other people doing, but the problem was, we didn’t have the exact same financial blueprint.
When you are trying to figure out how to start a budget that you can actually stick with, there are six simple steps to follow that will help you create your own personalized budget plan.
These are the exact steps YOU can take to finally set up a budget that works with how YOU get paid, what expenses YOU have, and help YOU achieve your goals so you can live your dream life on less!
6 Steps to Starting a Budget For The Last Time!
Before you get started, make sure and grab your FREE Budgeting Starter Kit! This is the exact method our family has been using for several years and has helped us to pay off over $20,000 in debt on just one income!
1.Figure Out Your Income
This is probably the most unique part of your budget. Everyone gets paid differently. Not only is the dollar amount different, but the “when” you get paid part is going to vary from person to person.
Is it monthly, bi-monthly, weekly, or bi-weekly? Catering your budget to the “when” you get paid is super important.
Gather three months worth of paychecks and take an average amount per paycheck. This “average” paycheck is what you are going to base your budget off of.
2.Set Your Goals
This part of getting your budget is going to be fun! You and your spouse need to sit down TOGETHER and figure out where you want to spend your money.
There are several categories you should be setting goals for. Again, this might look different for different families, but here are some ideas.
- Emergency fund ($1,000)
- 3 month expenses emergency fund
Think short term and long term goals here. For each category, write out where you would like to financially be in six months, one year, two years, and five years.
Under each goal, write action steps to take in order to reach those goals. If you don’t have a plan to achieve your goals, then it’s just a daydream.
3. Track Your Spending
It’s now the time to figure out where all your money is going each month. If you don’t already have a budget set in place, chances are you are wondering how your money vanishes so quickly.
Before we had our budget set up, this is literally how we would work every paycheck… “Yes! It’s payday!” Now we were able to go out to eat, go to the movies, buy that new shirt I wanted, grocery shop, and anything else we needed.
Four days before the next paycheck… a frantic text was sent to hubby “Don’t spend any money! We only have $10 in our account.” Then the cycle would continue with our next paycheck.
Stressful!!!! Not a way to live at all!
There are a lot of useful tools to use online or through apps to track your spending. The one we originally used was Mint.com. It’s a super easy way to track every electronic dollar spent and then have your spending categorized without much effort.
If you would rather use a pen and paper to track your expenses, I have a Spending Tracker within my Budgeting Starter Kit that you can download by clicking this link.
4. Minimize Your Expenses
You know how much money you have to work with. You know where you would eventually like to be spending that money and now you know what spending habits and expenses are standing in the way of achieving those goals.
Now it’s time to start cutting out the extras and get down to business.
Are you spending more money then you are taking in? Do you have enough money but are spending it in areas that you don’t value?
Look through your spending for the last month and see what areas you can cut back. Are you able to get any of your monthly bills reduced or completely eliminated?
You don’t really have to have cable and maybe you can get a better rate with your cell phone provider!
Look at every single dollar you spend and find ways to minimize that spending!
5. Set Your Budget
The most successful way our family has found to set a budget is to allocate every single dollar of every single paycheck. This is sometimes referred to as a “zero based budget”.
What that means is that before every single paycheck, we have spent every single dollar on paper. Each penny has already been assigned a job.
In order to do this, you are going to need something to keep track of your budget. Pen and paper are a classic way that works great, but our family has always used a simple excel spreadsheet.
If you are looking for a FREE tool, I have put together a Budgeting Starter Kit that includes both a free printable and the exact excel spreadsheet that our family has been using.
When thinking about what to include in your budget, your goals are going to play a huge part in this step. They will determine where you are spending your money.
Let’s go back to the “when” you get paid. Split your bills and expenses up per paycheck depending on when they are due. An example would be, if you have a bill that is due on the 25th of each month, pay that bill with the first paycheck of the month every month.
See if you can split your expenses so you are paying half at the beginning of the month and the other half with your second paycheck of the month.
If you get paid every other week, base your budget off getting paid only two paychecks each month. On those lucky months where you get a third paycheck, you will have “extra” money to put towards your goals!
If you get paid monthly, then all your monthly bills will be paid with that single paycheck.
Make sure to check out my monthly Family Budget Updates so you can have a better idea of how to separate your bills.
If you have annual bills or expenses, split that amount over the 12 months and put that money in savings. That way when the bill becomes due, you already have the money set aside ready to go.
Because we are setting up your budget with an average paycheck as your base, if there are months where you make more than you have planned, put that money into savings to cover the months when you make less than planned.
6. How to Stay Within Your Budget
Set yourself up with a system that will help you stick to your budget every single month. No one is perfect at this, but the more prepared you are, the less likely you are to go over budget.
You can read more details about how we run a cash envelope system here but let me just tell you, that it has been a game changer! When the cash is gone, we are done spending. There is no other option!
Meal planning… oh how I love my meal plans! They relieve stress. They save me time. They save my sanity!
One of the top categories that people overspend on is food. Meal planning can help you to thoughtlessly stick within your budget every month!
You can read here all about how our family plans out our meals and sticks under a $400 monthly budget for our family of 5.
One thing that will make every single step of this process easier is to get one month ahead of your bills!
I know that this might sound hard to do if you can barely make it right now as it is. Don’t let this idea overwhelm you! Read this article on how to get one month ahead of your bills where I break it down into bite sized actionable steps.
Are you ready to start spending your money on what you value most?
I hope that this beginners guide to setting a budget was helpful for you! Was there anything I left out? Do you have any questions? Let me know in the comments below and I would be happy to help where I can!
Thanks for stopping in and I will talk to you soon! xoxo
Beginners Budgeting Starter Kit
You're almost there! Just let me know where to send your Free Budgeting for Beginners Starter Kit and it will be on it's way over!