5 Steps To Create A Smart Budget (+ Free Budget Printable!)
Having a budget is a must-have for anyone looking to take control of their financial situation at home. But sticking to your budget is much easier said than one. But with steady practice, staying on track with your budget can get easier over time.
Here are 5 ways you can keep your expenses down so you can stay on track with your budget.
1. Know Your Money First!
To create a smart budget you need to know where your money is coming from and where it’s going. Without this, you have no chance of making your budget work.
So step 1 is to find out how much everyone in the family makes. This includes summer jobs and side hustle gigs in addition to your main sources of income. Don’t forget to include year-end work bonuses and tax refunds.
If the money varies month to month, get the last 3 months and average the total income out.
Knowing how much you’re making each month will put your financial situation in focus. Because at the end of this, if you realize you’re bringing in less than what you spend – something’s gotta give.!!
While reducing your expenses to make your budget work is a great idea, do not ignore the option of increasing your income! Doing this will allow you to maintain your quality of life. Look at my resources page for help with increasing your income from home.
2. Overestimate Expenses
Now that you know how much money is coming in, it’s time to figure out what’s going out. We need to create an expense report for your family to figure out what’s happening to all this money you’re earning.
You can use a spreadsheet to note your expenses, but a pen and paper will work too.
If you use a credit or debit card for all of your expenses, you’re in luck! Usually, there’s a year-end summary available in your account statements section. If you have several cards, you’ll need to add these figures up.
After you get the total, you’ll need to remember what other purchases you routinely make with cash. This could have been buying a used car with cash, or paying for $50 in gas every two weeks, etc.
Once you have your expense report finalized, it’s time to overestimate your expenses – because sh.. happens! That’s life.
Don’t you just hate when you make a budget and say your gas is $30, electricity is $50 and water bill is $80 and one bad month explodes your budget? Rather than trying to guess the exact amount each of your bills, overestimate them.
This way, if you have a good month, that means you have more money to spend on fun expenses. If you have a month where you use a lot of energy, then you’ll be right where you thought you’d be all along.
3. Use An App To Track Your Progress
Rather than writing down your budget on a piece of paper or using a spreadsheet, use an app to help save time.
Here are the best budgeting apps:
Best of all, some of these apps allow you to invite family members so you can share your budget with them so they can all keep track of their expenses right from their smartphone.
4. Follow The 50/30/20 Rule
The 50/30/20 rule is a simple smart budget anyone can follow. Here’s how it works:
- 50% of your income goes toward necessities like housing and bills.
- 20% of your income goes toward your financial goals, such as paying off debt and saving for retirement.
- 30% of your income (whatever is left) then goes to your wants, such as restaurants, movies and other fun activities.
Another popular budget is the 80/20 budget. In this one:
- 20% of your income goes toward your financial goals (debt and savings), and
- 80% of your income goes toward everything else (bills and fun)
No matter what budget type you pick, remember these three main categories: obligations, goals and splurges. Your budget needs to account for all 3 of these.
Don’t forget to fund your emergency savings account.
It NEEDS to be fully funded at all times, no exceptions. What happens if you happen to get into an emergency situation such as your car breaking down or an unexpected medical event? This is when your savings account will help get you through these times.
It may seem counterintuitive to put money into your savings while you still carry a debt like an auto loan or credit card debt. But having a healthy savings account is imperative to your financial wellbeing.
By not having enough in your savings account, you’re just setting yourself up to land yourself in debt all over again.
Add an entertainment expense.
Life isn’t all about saving every penny you have. What’s the point of being the richest person in the cemetery? Life should be fun, so even though this article is to help you create a solid budget, don’t forget to have some fun too.
It sounds strange to put aside money for entertainment since having fun should be spontaneous. But you should allot a reasonable amount for entertainment each month. By being too strict on your budget you will only go nuts and go on a mad spending spree. By actually factoring in some fun each month, you are more likely to not get frustrated and stick to your budget.
5. Use This Free Budget Printable!
Download this free budget printable to help you plan your expenses for 2020 and beyond. Using a simple budget printable can really help you see where your money should be headed in 2020.