If you want to start saving money, but can’t seem to find the time, or are just not comfortable with the idea of spying on your spending, this may be the article for you. We will share with you how to set up a budget, and some tips on how to put it into action. We will also look at some of the tools available to help you manage your money, and how to make the most of them.
The unspoken implication behind the title of this post is that some people don’t know how to cut costs when they just started out on their journey to save more money. This is true, to an extent. There are some people that don’t know the best way to save more money. To those people, we have to give you a little advice in just a few quick steps.
You know that budgeting is something everyone should do—but, most people don’t like to do it, or can’t do it. This is where a budgeting program comes into play. It will save you from the stress of budgeting, which will allow you to save more money for things you need. This article is going to show you how to make your first budget, and how to save money.After Ben and I got married in 2014, we had two incomes, but we also had debt, and we started paying for all those adult expenses that eat up all your money. So I learned to make my own budget, understand our expenses and save more. With our first budget, we understood why we could only save ~$40-50 per month.
From unemployed to saver
We lived from paycheck to paycheck and saved very little money. However, over the years I have improved my budgeting techniques and now I know exactly where our money is going. This allowed us to pay off most of our credit cards (over $15,000), buy and rent a house, and save enough money to live comfortably. I realize that it can seem impossible to start budgeting when you’re trying to find a way to stop feeling like you’re drowning in bills and barely covering your monthly expenses. That’s why I started writing about our personal experiences, so that (I hope) others can learn from them.
How we made our first budget
This is the FIRST budget I’ve made for Ben and me. The image below is a simplified version for reading on a mobile phone. I have divided all our questions into three categories: Fixed expenses (the amount is roughly the same each month), Variable expenses (expenses vary from month to month), and Save to spend (large expenses occur from time to time, such as car or home repairs). Save to Spend is also known as a savings fund. And, oops, as you can see from the picture above, our savings was only $ 44 per month in that first budget! Our budgeting exercise made it clear why Ben and I were struggling to keep our bank accounts afloat and couldn’t pay off our debts faster. Let’s see how we made our first budget.
4 simple steps to create your first budget
I’ll try to make this as simple as possible. How do I begin to create my first budget? I’ve put together this step-by-step guide to make creating your first budget as easy as possible:
1. Start with a simple notepad or spreadsheet
First, you need to decide where you want to keep your budget. You can just start with a notepad and then gradually move to a Google or Excel spreadsheet. The main options are as follows:
- A simple notebook or to keep track of expenses is an easy way to start. Make a list of all your expenses on paper. This will help you determine how much you are actually spending on budget categories like cars and utilities. You can also view/download my expense journal if you want to use a printed expense journal. Click here to find out how you can get an online overview of the charges made to your credit card or bank account.
- Budgetary pressure: Once you have written down all your expenses, you can create your first budget. If you like to do everything on paper to keep it simple, you can use printed budget forms, like our printed budget form below (download the PDF here). You can use this printable budget to list all expense categories (rent, car, utilities, etc.) and indicate how much you spend on each expense category each month. This will give you a good idea of where your money is going. You can also make a list of your deferred funds, which are expenses that don’t show up every month, but will have a big impact on your finances over the course of the year (like car repairs or Christmas gifts).
- spreadsheet on your computer (Excel or Google Sheets). Microsoft offers several Excel budget templates (link).
- Online budgeting tools like QuickBooks or apps like You Need a Budget (YNAP is a free app for the first month).
So, now that you know where your budget will live…. let’s start making a budget!
2. Enter all categories of your budget
It’s time to make a list of all the budget categories, such as groceries, insurance, or restaurants. Most budget categories include more than one type of expenditure. For example, the car budget category includes expenses for gasoline, car repairs, tire changes, or oil changes. There are many different budget categories. So make sure you don’t overlook the most important ones. A budget only works well if it is FULL. I’ve listed below the categories we use to put together our own budget:
3. Allocate dollar amount to each category
For each budget category, assign a number – how much you spent per week or per month for each budget category. Use your best estimate for each category, keep receipts or look into the history of credit cards or bank accounts spending. Analyze all of your expenses from the last 2-3 months, as not all expenses will be incurred every month. You can either jot down your expenses in a notebook and add them manually for each category, or you can use an Excel budget template to enter your expenses and select a category for each. How do you account for irregular but significant expenditure, e.g. B. for car repairs? These outputs are listed in the Save for Output category. As for reserves for expenses, I divide my expected annual expenses into smaller amounts that I fund each month. For example, when it comes to maintaining my car, I know that I don’t have to service my car every month, but when it breaks down, it gets expensive. So I set aside $110 each month to supplement as needed. That means I put $1320 into my car maintenance budget every year.
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Here’s what our spending looks like by budget category: Once you’ve done all the hard work (not so fun!), you’re ready to reap the rewards.
4. Start saving! Budgeting for major expenditure categories (e.g. restaurants or groceries)
Now that you know how much you’re spending in each category and what you need to cut back on, I recommend you start determining the maximum allowable spending for some of the major categories you can cut back on. Set a number and stick to the new budget. For example, I recommend that you set an amount for groceries and shop within that amount. This will help you make good decisions and motivate you to cut costs. If you go over your budget, realize that you will have to make up for it with your next purchase! You can also brainstorm with your spouse about the major spending categories, or use our example on how to save an extra $5,000 a year on a budget. If you’re ready to take the next step, you can also check out our top tips for budgeting to save money.
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It is a great feeling when you get a pay raise or a bonus at the end of the year, or when you beat your previous year’s budget. But it is also important to note that when you start making more money, it means you are also spending more. So you need to make a budget and save more money.. Read more about how to make a monthly budget and let us know what you think.
Frequently Asked Questions
How should a beginner budget?
This is the part where we explain to you how to save money, and you will teach us how to spend it! It’s a classic problem: you want to spend money on something fun but you don’t have any money. If this sounds familiar, this post is for you! We’ll show you the most cost-effective ways to spend your money, and explain why you’re probably spending money on things you don’t need. When I started this blog, I knew I wanted it to be a place to help people start budgets and stick with them. So, how should a beginner budget? It’s not that difficult to figure out, unless you’ve never done it. The key is to keep it simple. First and foremost, you need to track your income and expenses. There are many budgeting apps out there, but I prefer to use the free version of Excel to create a budget that includes all my main monthly spending categories. Once you know what you’re spending, you can start looking for ways to save. Of course, some of the ways you save might be too drastic, or be an expense you end up forgetting about. Don’t stress out about the details
What is the 70 20 10 Rule money?
The 70 20 10 rule is a simple equation that shows you the best way to balance your spending and saving for any time frame. If you don’t know the formula, here’s how it works: 70% of your take-home pay goes towards your most essential expenses (rent, utilities, groceries, and health care, for example). The remaining 20% of your take-home pay should be saved and invested for the future. In other words, it’s time to get serious about budgeting. Most of us try to save money, but that’s easier said than done. A lot of us don’t manage our incomes very well: we are either too conservative or too liberal with our spending.
How do you do the 50 20 30 budget rule?
We are going to use the 50 20 30 budget rule, which is a very simple idea that has been around for quite a while. The idea is that you should spend 50% of your income on necessities (food, shelter, transportation, clothing) and 20% on necessary luxuries (electronics, entertainment, savings, travel), and the remaining 30% on non-necessities. For anyone who wants to get serious about financial independence, the biggest obstacle is none of their own making: they lack the financial discipline to consistently stick to their desired lifestyle. But they don’t have to make up a bunch of rules—they can just use a proven alternative: the 50-20-30 budget.
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