How to make a budget
One thing that can be difficult to do is to make a budget and stick to it, but there are times when you need to cut down your spending.
Whether its because you found your income is less than it was. Or you want to save up for a big purchase or family vacation.
Deciding where you can cut spending can be overwhelming for many people. If you follow what is outlined here, you will be well on your way to creating a budget that is easy to stick to.
How to track your spending
The biggest hurdle that most people face when making a budget is just getting started.
Take a step back and look at the big picture, what is it that you spend money on each month. You should be able to find things that you can easily cut out.
Once you identify the unnecessary spending, you can start to make cuts. Your first step in any of this is to make a list of bills and expenses each month.
Try to get as detailed as possible by including everything that you might buy or spend money on over the course of a month.
Things like rent, utilities, car payments, and insurance would go under your monthly bills. These are normally fixed bills that don’t change to much each month.
For bills that may change each month find an average payment amount and base the monthly off of that.
That way if you get hit with a higher than normal bill, you have already figured into the monthly bills.
Your next step is to look at your necessary spending. This would include things like internet/cable bills, phone bills, and gas for the car.
There are other things that you may want to include in this like ONE streaming service that you pay for each month but try not to go crazy adding things.
The point is to CUT spending not justify it.
Narrow Down What to Cut
This next step is one that everyone hates to do. Actually making the cuts to unnecessary spending.
Buying coffee every day, eating out, streaming services for shows and movies, and the memberships that you don’t ever use all fall into this category.
Think about it. If you spend $5 a day for coffee 5 days a week, that is $25 dollars a week. Even if that is all you cut out, your saving $100 a month. Which is a good place to start. If you start to make your coffee at home before you leave, then you don’t have to stop for it. Then you can easily cut this expense out.
Eating out for most meals is another thing that can be cut.
If you are like most people you can spend up to $100 or more a week as a family eating out. Again if you do the math that is at least $400 a month that does not need to be spent.
I know eating at home all the time sucks. But you don’t have cut out all your “luxury habits” just tone down your spending a bit.
Instead of eating out several times a week, limit it to once or twice a month. It can be hard to adjust to, but in the end, it will be worth it.
Once you start to see the extra money adding up it will keep you motivated to stick to your new budget.
Streaming services and Memberships
If it’s something that you don’t use every day then cut it.
Why pay for stuff that you don’t use?
If you never watch cable, go to the gym, or anything similar you should cut them out. Check what services you might be signed up for that you don’t use.
Chances are there are one or two that you don’t need. Cancel the service and put the money away.
These are often on auto-pay and you don’t always see the bill each month. Go through your credit card statements to see what is on auto-pay and can be canceled to save money.
Figure out your income vs. expenses
If you have a steady paycheck than you more than likely already know what you make each month.
But if you have a schedule that changes, then your income will be different each week.
One way to figure out what you make each month is to do an average of a two-month period for those that have different hours each week. It gives you a better idea if you have two months to look at instead of just one.
Total up all of your necessary bills in one column and expenses in another.
A worksheet lets you see where your money is going each month. Looking at the numbers helps to give you a better idea of what is coming in and what it’s being spent each month.
Taking a step back and looking at the physical numbers also lets you see what you might be spending too much on. I have a post here that gives you some more ideas of ways that you can save money each month.
Related Reading: Practical Tips to Save Money and Budgeting Tips for Servers
Make a Savings Plan
Once you know how much you have coming in and going out each month, you are ready to get down to business.
If you have certain things that you want to save for like a trip, the holiday’s or a big purchase then go ahead and figure out the amount that you want to save.
Otherwise, figure out what you want/need to save money for and work towards those goals. It might be to pay down debt that you have or to save for retirement or for a child’s college.
Whatever it ends up being, make sure that you set reasonable weekly or monthly amounts. It does no good to have some huge amount that you cannot realistically save each week or month.
An example of this would be saving for a vacation in six months.
If you know that the whole vacation will cost $2000. Then you would need to save about $340 a month to be able to cover the cost. Break it down farther to $85 a week.
If you want you can break it down by day too. Which would be $12 a day. When you look at the numbers broken down it looks a lot more reasonable and attainable than saying you need to save $2000 for a vacation you want to take.
Sticking to your new budget
After you map out your new spending with a budget you need to stick to it.
Make sure that you put it somewhere that you can easily see. Put a note or picture in your wallet or purse that will remind you not to spend extra money.
This can be as simple as a frowny face near or on your credit cards that you have to look at before you pull them out.
Another way to keep your spending in check is to use cash instead of cards. Give yourself an allowance each week of what you can spend on non-necessities.
Once that is gone, it’s gone. This can help to get you in the habit of NOT spending money every time you go somewhere.
Final thoughts on How to Make a Budget
Even though the thought of creating a budget can be intimidating, it’s really not all that hard. You just need to take the time to find out what you are spending money on and what you can cut out. In the end, the reward of having extra money to save each month is worth the initial headache that comes with making a budget in the first place.
Have other ways to cut spending? Let me know in the comments!