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Creating a Budget and Savings Plan

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Tosha is a mother of five, a former childcare provider, and currently a business professional.

Creating A Budget You Can Actually Stick To

Creating a budget and sticking to it is challenging. Ask any family in America today and at least 90% of them have financial worries and would like to be more financially secure. Whether your bringing in $20,000 a year or $ 200,000 a year you can still find yourself in financial ruins if you don’t budget your finances effectively. We have all sat down at one time or another and tried to create a budget or read some literature on securing financial freedom, and thought ok I’m going to start saving and budgeting and create a better future. The problem with this approach, is often times the budget you create is either too complicated to follow, unrealistic, or too simple and does not account for all of your necessary expenses. Therefore, the trick is to create a budget that’s sophisticated, flexible, and easy to follow.

Set Your Goals And Make A Plan

Before you make a budget, you need to do a little pre-planning. It’s important to list out all of your bills and their usual amount, in addition to your major expenses you should also take a close look at where your money is going. Look over your bank records for the last few months and try to organize your transactions into categories. This way you have a better idea of exactly where your money goes. This will give you the ability to create a budget your actually able to stick to. Get a goal in mind, decide how much you want to save each month. Maybe you want to plan a vacation, start saving for retirement, or have a nice down payment for a house. Either way give your budget a purpose. You may want to just become more financially stable and that’s great, but I suggest you break your saving plans down into smaller more achievable goals.

Deciding What You Will Use To Create Your Budget

Once your actually ready to begin creating your budget decide what software your going to use. Personally, I prefer Excel because it’s interactive and does the math for me. I can plug in my pay check each pay day and all of my expenses are already saved in the workbook. It does the math for me and shows how much money I have left. If you’re not familiar with Excel, you can use word or even a notebook and pen. The goal is to create a budget in such a way that you can keep track of your progress and make adjustments when necessary. You don’t want a piece of paper that you throw in your kitchen junk drawer and never look at again. Either way you want to ensure that whatever you use to create your budget your able to make adjustments and keep track of your spending. Another idea is to use an interactive app on your phone many mobile banking apps have this feature and there are even some downloadable apps that serve the same purpose.

Plugging In The Numbers

Once you’ve done all of your pre-planning and compiled your bills and usually expenses, creating your actual budget is pretty straight forward. For the most part it’s just plugging in the numbers. You want to start by adding your paycheck. I suggest using a conservative estimate of what your normal paycheck would be this way if you work a little over time you can use that money and throw it in savings or buy something you want either way it’s a good idea to make your budget without over time or bonuses calculated in. Once you plug in the info from your paycheck you want to deduct your usual expenses. I start with my bills and other necessities like gas, groceries, and child care. These are the items that are most important each month, the things I have to pay no matter what. I then divide these bills and necessities based on the pay period they will be coming out of. For instance, I get paid bimonthly I know my rent is due on the first my lights on the 3rd my cable on the 22nd and so on. Therefore, my budget is divided into my pay periods instead of a whole month. I list my most important bills and expenses under each pay check they are coming out of. Once you’ve got the necessities calculated and deducted it’s then easy to see what’s left over for savings, entertainment, eating out, and so on. Personally, for the sake of simplicity I calculate my savings each check and have an automatic withdraw to my savings from my checking, this way I don’t even have to think about that money. Remember when I said a lot of budgets are just too complicated to stick to.

Miscellaneous Money And Unexpected Expenses

The next trick I use is to categorize my entertainment, eating out, and other things that maybe aren’t necessary, but I enjoy into one category called miscellaneous. This money I then pull out in cash every pay period. By doing this I know exactly how much I can spend and for me at least it’s a lot easier to keep up with when I can physically count the money and watch what I spend it on. In addition to my miscellaneous money I also try to keep a reserve in my checking account. Inevitably no matter how well you plan there will always be those unexpected expenses. A birthday gift or the oil change you forgot to budget in. This is where a lot of people would either pull money out if their savings or unfortunately throw their budget out the window all together. The best way I have found to combat these unexpected expenses is to keep some reserve money. You can open a second savings if necessary, use a prepaid card, or even just keep it in your checking account. Either way the goal is to pretend as though this money doesn’t exist until you need it. If you do leave it in your checking just remember to budget only the paychecks you have coming in. For your reserve money or emergency fund donate a small amount that you won’t miss maybe $20 per pay period.

Making Small Cuts

Make small cuts where you can. Often times one of the hardest things about budgeting is people have unrealistic expectations about how to budget their miscellaneous money. They think ok I’m going to get by with $10 a week, this thinking leads to a crash and burn scenario. If you make your budget unrealistic you will never stick to it. The best thing you can do is make lots of small adjustments and as time goes on make more small adjustments. If your accustomed to going out to eat twice a week maybe decide your going to do it once a week instead. If you’re really trying to live the minimal life style maybe try using a reward system like once a month you hit that favorite restaurant to reward yourself for saving so well. One of the biggest ways to save is just to cut corners and do comparison shopping. Buy some of the store brands when you’re at the grocery store, shop around for the best deal even with small purchases, cut some coupons, and set limits.

Stay The Course

Budgeting and saving is a life style change. Therefore, it takes time to master and implement. You’re changing the way you see money and how you use it. It may be difficult at first especially if your giving yourself small allowances to pad your savings but keep at it. In the end you will be glad you did. Stay the course even if there are months where your budget gets off track try to see what went wrong, what you can do to prevent that from happening again, and then get back on track. If you need to make adjustments to your budget. This should be a dynamic document that you are able to re-evaluate often and make small changes.

Comments

Louise Powles from Norfolk, England on May 07, 2018:

I really need to start budgeting my money. It's always worthwhile doing in the long run. Thanks for the advice, it's been helpful to read.