Budget. The word alone has such an awful sound. And when you get past the word and think about what it might mean to your life — like setting up “limits” to your spending — not much there to get excited about either, is there?
But what if I tell you those “limits” can eventually help buy you freedom? And the ability to buy things you really want down the road. Or help you retire one day without relying on cat food lunches. Or just help make it possible for you finally be able to sleep late without any credit vampires waking you up.
Why a budget plan might be a good thing
If you’re reading this, you probably already have some idea of why you might want to create a budget for yourself. Maybe you don’t have any savings. Or maybe you see everyone else around you with a lot more savings and would like to do that for yourself.
Or perhaps you’re dreaming of a house some day and want to be able to truly afford it, and not be swamped by debt while trying to live the good life. Or maybe you simply worry that you’re spending is so out of control you can’t imagine what being in control again might ever look like.
So a budget — our new best friend — might be exactly what’s needed. Not only can it help you get a handle on what you’re really doing with your money over time, but the things you learn can help you develop new habits that become second nature to you.
How to create your budget plan spreadsheet
If this is the first time you’re trying to put together a personal budget, I’d suggest taking it slowly. Creating a budget can feel a bit overwhelming. Not only are you dealing with spreadsheets and numbers and … ugh … lots of little details, you’re also forcing yourself to look honestly at the way you live your life. It can be a real eye-opener!
So where to start? In order to get a good picture of where your money comes and goes, a good place to begin is by looking at your “cash flow” — both money coming in (revenue side) and money going out (expense side). And when I say money, I mean cash or credit or even an IOU!
This article shows you how to create a spreadsheet (chart) to see what flows in and out each month. You don’t have to do this to create a budget, but since the steps are pretty much the same when it comes to the expenses side (what flows out), I’d suggest you start here:
This will help give you a great picture of the way you really spend money compared to what money is actually available. It will also help you think about where you can start to make changes (expense cuts or revenue increase) so you can actually make room for savings.
Types of budget expenses
Traditionally budget expenses are seen as those that you know are coming (some monthly, some every few months or annually) or those you can choose to spend on as the urge strikes (even if some feel like musts at the time). There are also occasionally unplanned things you’ll need to find money for.
In the sample budget I prepared (below), I divided expenses up into “required” and not required, to help make it easier for you to figure out where you can make adjustments. Of course, even when it comes to required (fixed) expenses, there may be some creative wiggle room.
• Required monthly or annual expenses – Things you absolutely need to find money for, like rent, food and utilities.
• Expenses you have control over – How often you eat out, movies, clothes, and even shoes. (I’m sorry, Carrie Bradshaw, but it’s true.)
• Unexpected expenses – These are things you are going to need to spend on, even though you had no idea they were coming, like medical / dental emergencies, unplanned trips, marriage, pregnancy, family emergencies, etc.
NOTE: For items that aren’t the same every month, estimate your annual spending and divide it by 12 to make it monthly. A budget like this is just a plan, not set in stone. This is meant to help you get a better picture of your spending — and use it to plan for an even better future.
Sample monthly budget spreadsheet
The categories used here (like the ones in the sample cash flow linked above) are only examples. You’ll have to figure out which categories you’ll need to include in your own budget by looking at your actual spending over many months. (I’d look at a whole year).
Checking accounts, credit statements, and even calendar/journal notes can help boost your memory. Think about where you’ve been and what you’ve done, but also where you are going to help you come up with a full picture of your budget categories.
NOTE: It’s ok to lump some of them together, especially later on. But maybe at first the more details you have, the easier it will be to find ways to save. This is up to you, of course. Oh … and I only used 6 months, but you’ll get the idea for how to create it for an entire year.
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So what do I do with all that?
If you’re not familiar with spreadsheet software (like Excel), my best advice is to start with a plain old piece of paper and a pen. Start jotting down things you need money for, even before checking your bank statements, etc.
For some of you, this will be something you can put together in a day or two. But even if it takes you a week or more (I’d rather you do it in a way that doesn’t overwhelm), this will be a tool you’ll have for the rest of your life. So be gentle on yourself and build it at your own pace.
And once you have it sitting in front of you, let it help you spin numbers into stories of where you can and can’t find savings. Or what things might need changing — even for instance an apartment that doesn’t suck you dry. You’ll be amazed what numbers can tell you if you let them talk!
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