If you’re a beginner and you don’t know where or how to start budgeting, this post is for you!
Don’t know where your money goes by the time you’ve paid your mortgage and bills?
In this post, I’ll teach you exactly how to have an organized system to start your budget AND you’ll get a FREEBIE!
This is the post you’ve all been waiting for; THIS IS IT!
This is your guide, or better yet, your cheat sheet on how to start your budgeting journey!
SIDE NOTE: I’m so EXCITED to announce that I have a FREE 5-DAY email course to help you get the strategies & tools you need to have a plan for every single dollar that you have!!! Did I mention that it’s completely FREE? You have nothing to lose and everything to gain.
It will include some of the worksheets below for you to utilize and you’ll get Day 1 as soon as you sign up below.
Back to budgeting 101…
First let me tell you that I’m an all cash spender and it’s easier for me that way. I get to see exactly where my money is going and I like it that way. After reading this post, you most likely will be too! Just give me a chance to explain!
Let’s get the boring stuff out of the way shall we?
What is a budget?
It is a detailed report of what you bring in and what you spend. In other words, it is your income and your expenses.
Overall, your budget is your plan for what to do with your money. It allows you to have control of exactly where you are telling your money to go so that you’re not left wondering:
‘Where did all my money go?’ (Which is exactly how I was feeling every single paycheck).
WHY do you need a budget?
Because it’s freeing, it’s liberating, it is GOLD.
Wanna know what the most freeing this about budgeting is?
It’s the freedom of telling your money exactly where to go instead of random surprises and a sinking gut feeling of swiping that credit card over and over again.
STEP 1: WHY?
Now the first step to budgeting is: DEFINING YOUR “WHY?”
Maybe you want to save for a down payment, maybe you want to pay off all your debt (like me). Whatever your motivation is, let that be your driving factor to creating a budget and sticking to it.
Right now, I want you to write down your WHY. WRITE IT DOWN, I’m waiting. THIS is the most important piece of paper, scrap paper, notepad, whatever.
NOW stick it on a wall.
Step 2: Set Goals
Now that you know your why, the next step is setting your financial goals depending on what’s realistic and important to you. I want them to be SMART goals;
SMART= Specific, Measurable, Attainable, Relevant, and Time-Bound.
Which sounds better?
I want to pay off all my debt.
OR
I want to pay $3,000 on credit card #1 in 4 months.
I hope you chose the second one. By doing this, you are holding yourself accountable by saying, I have this much time to pay off this much debt.
Here’s another one:
I want to start an emergency fund.
VERSUS
I will put $500/month into my emergency fund for the next 12 months to reach my $6000 goal.
Before you set your goals, remember what I just said, make sure that they are SMART goals. THIS IS CRITICAL in starting your budget plan and road to financial freedom.
Step 3: Your Budget Calendar
I want you to get a calendar, preferably an empty calendar. If you don’t have one, no problem, sketch out two 7×5 boxes (7 horizontal & 5 vertical) and write out this month and next month.
These calendars will be your map to your budget plan, so it is CRUTIAL that you do this step.
Next, determine your monthly/biweekly/weekly paycheck. If your paycheck is different every single time, write down the total of the lowest paycheck that you’ve received.
Write PAYDAY on your calendar whatever day(s) it falls on. This is your income.
On the calendar, write out ALL of your expenses on their due dates.
If you don’t remember all of them, go through your last 3 bank statements, this will show you your reoccurring bills. These are your expenses.
Step 4: Estimating your Day to days
On a blank piece of paper, write out your spending money categories. These are not your bills (we already took care of those), these are your day to day expenses like food, gas, entertainment, etc.
To help you, look at your past 3 bank statements again to figure out what those categories are. These will be your cash envelopes categories. Now I want you to estimate how much money you need for each category per paycheck period. You are essentially creating a budget for your specific categories. I really want you to think about these categories and how much you spend on each per paycheck period.
For example, I get paid biweekly, and these are my categories:
- Food- $150
- Coffee- $20
- Gas- $100
- Fun- $50
- Beauty- $50
- Pet- $50
It took a lot of trial and error to figure out how much to allocate to each category. Try to be as realistic as possible with your spending habits.
Every month on my Instagram, I show you exactly how I do this with my own personal numbers!
Step 5: Sinking funds
These are your short terms savings. These are the savings that you should be budgeting for but are probably not.
For example,
- emergency fund
- gifts
- vacation
- car maintenance
- taxes (if you’re self-employed like me)
Write down how much you want to save for each, the goal date and divide it by how many months left you have to save. Take your financial goals from step 2 and add them here too!
This is your FREEBIE, click the worksheet below!
For example, I want to save $1200 for my Mexico trip in 6 months, that means I have to save $200/month.
($1200/6= $200/month).
Do this for all your sinking funds and that will be the budget you have in place for those funds.
Now you are ready. Everything is mapped out and you are ready to create your budget.
Step 6: Put it all together
Let’s go back to your calendar, you’re gonna grab a few highlighters.
READY?
Highlight your payday with yellow (everyone has a yellow highlighter; but use whatever colour you want). Now, every single bill you want to pay with that paycheck will be highlighted in yellow, stop the yellow highlighting right up until your next paycheck.
What you’re going to do next is write down and highlight your second payday in green. Highlight all your bills after that date in green that you will be paying with that paycheck right up until the next payday.
Great, now all your bills are covered.
Find out what you have left from payday 1 minus all bills in yellow.
This remaining balance is what you’re going to allocate towards your cash envelopes (which we covered in step 4). These will be your groceries, gas, etc.
See how everything is coming together?
Next you’re going to see what you have left; subtract your remaining from the budgeted cash envelopes.
This remaining balance will be allocated towards your sinking funds (we covered this in step 5). Choose how much you can afford to put in each sinking fund from the remaining balance.
SIDE NOTE: after covering your bills, some people might not have much money left over. You NEED money to be left over to ATLEAST cover your needs, if not, find a way to decrease/cut your bills or increase your income.
Read my post about ‘Paying your bills when you can’t afford to’ here.
If you have extra money left over, put it towards extra debt payments, if you don’t have debt, even better, SAVE SAVE SAVE.
Step 7: Zero-based budget
Subtract the remaining, after you’ve budgeted your sinking funds and extra debt/savings, it should be ZERO.
AND VOILA!
That’s it, you have created your first budget plan!
Do the same thing for the green highlighted payday and bills.
NOW YOU’VE CREATED 2 months work of BUDGET PLANS!
You will do this every single time before you get paid so that you know exactly where your money is going.
At the beginning I told you that I am an all cash spender, try this budgeting method. Try it just once, even if you don’t like cash.
I promise that it will make the biggest difference in your financial journey. You don’t have to be rich to have a budget plan, you just need to make an income, that’s it.
If you’re really struggling with money, read this next post, believe me, it’ll help you!
Again, as a reminder, if you liked this post, the FREE 5-day budget course will include the worksheets I showed you above BUT YOU MUST sign up to receive Day 1. Click here now.