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You already know that having a budget is a must-have for anyone looking to take control of their finances.
But sticking to your budget is much easier said than done.
I know that staying on track with your budget can be a challenge, so I wanted to share with you how to create and stick to an easy budget.
Know your money first
To create a 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.
Overestimate your 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.
Use an app to track the flow of money
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.
Follow The 50/30/20 Rule
You know you need a budget, but where do you start? How do you prioritize what you spend on?
Here is the 50 30 20 rule of budgeting:
- Set aside 50% of your income to go toward necessities such as housing and important bills.
- Set aside 20% of your income to go toward your financial goals. This includes paying off your debt and starting to save for retirement.
- Finally, the last 30% of your income can go toward your wants. This is all that fun stuff like restaurants, movies and other forms of entertainment.
Download this free budget printable to help you prioritize your spending. Use this to help you determine what expenses matter most and need to be paid first.
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 an easy 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 actually factoring in some fun each month, you are more likely to not get frustrated and stick to your budget.
Fund an emergency savings account
Your emergency savings account 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.
7 reasons your budget just ain’t working
If you’ve done your homework and made a budget you might be surprised to see that it’s not working. Setting and sticking to a budget are two different things that require different skills. Most people that have a budget find that creating it was much easier than sticking to it.
Read on to learn 7 reasons that your budget might not be working.
- Your Budget Is Far Too Strict
In an effort to save money, a lot of people are tempted to skim and save as much as possible. That means you may cut back on your food allowance and forget to include an entertainment fund.
Unfortunately, all work and no play makes life pretty dull and it also makes it really easy to cheat on your budget, causing it to fail. To remedy the situation, choose just 1 or 2 areas to skimp on so you don’t feel the hurt of saving money all at once.
Dieting works the same way. If you cut out all junk food and go on a strict diet, there’s no way you can maintain that. Inevitably you’ll go on an eating binge since the change was too drastic.
- You Haven’t Set Any Savings Goals
Everyone does better when they have a prize for good work. You need to infuse your brain with endorphins and dopamine, which are released when you achieve goals, even small ones.
Having a goal for your saving can make it easier to stick to your budget. Whether you’re saving for a downpayment on a house or going on a dream vacation, having a light at the end of the tunnel can make it easier to stay on track.
- You Don’t Adjust Your Budget
Your budget won’t be perfect from day 1 and you’ll likely need to make adjustments as life changes.
Whether you have a large expense come up like preschool for a child or the cost of living just increases, you’ll need to adjust your budget once in a while to keep things running smoothly.
It’s good to periodically visit your budget to determine what’s working and what isn’t working. Aim to review it every month in the beginning and then every 6 months or quarterly after that.
- Your Spouse Isn’t Sticking To The Budget
If you’re a saver married to a spender, it can be easy to go over budget. Remember that when you’re part of a partnership, both partners need to be on board to keep the budget on track.
If only one of you is sticking to the budget plan, your budget is never going to work.
- You Didn’t Make A Fund For Emergencies
Having a working budget is great – until your car breaks down or someone gets hospitalized.
Emergency expenses can derail even the most carefully planned budget, so it’s important to create an emergency fund to cover these types of expenses.
Ideally you’ll have 6 months of living expenses in it, but if you can only scrape up $100, it’s better than nothing. ?
Anytime you get some extra money (like a work bonus), deposit it into your emergency savings account until it reaches the desired amount.
- You Didn’t Stick With It Long Enough
Your budget won’t work perfectly from day one. You need to give it several months to smooth out and to adjust before you can really tell if it’s working.
If your goal is to save money, expect to not put anything into your savings account until the third, fourth or even fifth month as you make adjustments to your budget where needed.
- You’re Really Opposed To The Idea Of A Budget
If you don’t like the idea of a budget to begin with, it’ll be hard to stick with it. If you hate budgeting, it may be wiser to try a different money management technique that you may have more success with.
One way doesn’t work for everyone, so if budgeting isn’t right for you it’s better to cut your losses and find something that does work.
To make budgeting less painful, use a budgeting smartphone app. The colors, graphics and sounds may be enough for you to convince you to keep sticking to your budget.
Wrapping it up
Alright that’s it from me. But one more thing. If you found this printable helpful, all I ask is that you share it on Pinterest or Facebook. Thanks!