This is part 3 of the series ‘Budgets for Dummies.’ Try starting with part 1 and part 2.
So far we’ve talked about why you need a budget and how having one gives you the freedom to spend.
Now, when I start talking about building a budget, don’t let it scare you. Building a budget is incredibly easy and, as you’ll see in part 4, maintaining it is even easier.
We can knock out budget building in 3 simple steps:
1) For the next 30 days track your expenses: I think the simplest way is to get a notebook and record every transaction you make. This includes everything from the mortgage payment to your morning cappuccinos. Every time you spend money write it down!
2) Schedule a family meeting at the end of those 30 days. In the meeting you will make the [tag]budget[/tag]. Let the whole family participate. This serves 2 purposes. First, everyone will be familiar with the budget. Second, no one can complain later that they don’t like how the budget is set up.
Now take your notebook and look over all of you expenses for the last 30 days. Go through each [tag]transaction[/tag] and assign it a category. Here is a great tool to help you with this step. Using that sheet, enter the amounts that you [tag]spent[/tag] in each category, total them up and then calculate what percentage of your pay check it takes up.
If you prefer, you can set everything up in Excel or Google Spreadsheets. If you spent more than you make, then look over your budget, is there anything you can cut back on? Cigarettes? Starbucks? Dining out? If you’re having trouble deciding how much to allocate to each [tag]category[/tag] take a look at Crown Financial Ministries Spending Plan Calculator.
3) After 90 days come back again and review your budget. Are there categories where you [tag]budgeted[/tag] too much or too little? Are there some bills that you missed the first go around? Your budget won’t be perfect, it takes time to refine it. Which is exactly what part 4 is about – Refining Your Budget.
I hope that this helps you tremendously in your financial life. Having a budget is one of the cornerstones of [tag]financial freedom[/tag]. If you have any trouble building a budget leave me a comment below, I’d be glad to help.
Questions? Answers? Leave me a comment!
This has been part of the Budgets for Dummies series. You can find the rest of this series here, here, here and here.
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