Lifestyle + Finances | Updated Oct 19
how to budget easily
By the time you finish reading this post, you can have your own personalized budget ready to go. So let's dive in.
Budgeting is super important to personal finances, but many people feel overwhelmed or confused by it. Maybe that's you.
One way or another, I'm guessing you're here because you realize that budgeting could potentially have an impact on your finances. And... you're so right!!
I firmly believe budgeting is essential and will change the game for anyone who gives it a shot, regardless of where your finances currently are.
Budgeting explained
To start off, I gotta say what budgeting is.
Basically, budgeting is the activity of calculating your income (total money that comes into your possession) minus your outflow (total money that leaves your possession) each month.
You can do this in two different ways:
1) At the end of the month, you can create an actual summary of how your money was spent.
2) At the beginning of the month, you can create a plan for how you will spend your money.
I suggest you do both: first create a plan each month before it starts, and then also track how you actually spend your money as the month goes along.
Trust me, you'll be surprised at what you find out!
This process allows you to gain control of your money so you know where it's going and can start putting it to work for you, instead of you working for it.
Budgeting tools & methods
Budgeting may sound complicated, but there are some great tools that can help make it easier and simpler.
Some tools that can help are:
- Budgeting apps
- Budget tracking templates
- Cash envelope/stuffing systems
A lot of people also use spreadsheets to budget, but I don't.
I only use methods that are fun and easy for me, so those are the ones I'm going to focus on.
My personal budgeting system includes:
- Budget tracking sheets (or app)
- Cash envelope stuffing
- Monthly cash flow summary
easy Budgeting: how-to
To make budgeting as easy and fool-proof as possible, I highly encourage using the envelope system!
Alternatives are using a budgeting app, or simply tracking your card expenses on tracking sheets.
Creating the plan
Here's how to start a budget from scratch, either way:
1. Grab a piece of paper to write everything on, and title it "Budget Plan" or "Expected Budget".
2. Next, write out all the income you expect to receive next month, with dates, and total it up.
3. Now write out all of your expenses (bills, debt payments, and literally everything you spend money on.)
Tips for writing out expenses:
- Start with necessities first (housing, utilities, groceries, transportation).
- Go carefully through the full list I linked above and be realistic.
- Put a little money aside monthly for future things that aren't monthly.
- Allocate money to "unexpected expenses", or else you may end up giving up on your budget later. There are always things that come up unexpectedly.
4. Next you just need to total up your monthly expected expenses.
5. Now double check that your expected income is higher than your expected expenses. If it is, that's great!
Whatever money you expect to have extra, allocate that to a savings or debt goal on your paper.
Now your budget balance should total zero, because you told every dollar where to go. That's good!!
5b. If your expected income is actually showing up lower than your expected expenses, then you have a problem to solve.
You need to go back to your expenses list and adjust things like eating out, fun, entertainment, and clothes, that are not necessities. If you have to, make them ZERO! I promise, you'll be ok.
Now you should end up with a zero balance, and that's good.
Executing the plan: Envelope cash-stuffing
If you want to try the envelope cash-stuffing system to help you succeed, here's what to do:
1. Total up all categories that are not bills. Plus, also include any bills that you pay with cash. Now this total is the amount you will need in cash, if you don't already have cash.
2. If you have enough money in the bank, take that total out and split it up into envelopes labeled for each category. If you already have your money in cash, do the same.
2b. If you don't have enough money for that and need to take it week by week, that's ok. All you need to do is take another sheet of paper, and divide each expense category into 4 weeks, or however many checks you get per month.
Then when each check comes, you will take out the new total in cash to put into your envelopes.
3. Leave your cards at home, and strictly use your cash envelopes ONLY while you're working on your budgeting skills!
It will be easy to integrate using your cards later also if you want, but when you're getting started it's super important to ONLY use CASH. This will challenge you to see exactly how much you're really spending.
4. If you do end up making any purchases using a card, whether in person or online, you need to immediately take that amount of cash out of the correct category envelope, and deposit it back into your bank!
Executing the plan: Other methods
If you're opting out of the cash-stuffing/ envelope method, you can instead track your spending throughout the month.
However, this is much harder, and requires a much bigger time-commitment, which is why I don't recommend it starting out.
Apps
Every app will work a little different, but you need to make sure every single dollar you spend is being tracked in the correct categories. You will likely need to create the categories on the app and then make sure you're adding and organizing your spending.
Physical Tracking Sheets
I personally use physical tracking sheets for some of my categories, and cash envelopes for other categories.
But this definitely does take time, because you need to keep it updated daily, or weekly at a minimum. Plus, it's easier to lose control of your spending when you're using a card.
How I use physical tracking sheets:
1. Create a sheet for each category and label it at the top.
2. On each sheet, create four columns going down the page and title them: Date, Cost, Item/Store, and Balance.
3. Write your beginning balance at the top next to the word balance.
4. Every time time you make a purchase, write it on the correct category sheet, subtract it from the total, and record your new balance.
5. When it hits zero, you have to STOP spending in that category for the month!
The Budget summary
Like I said earlier, I recommend summarizing where your money actually went at the end of each month.
Especially for the first 3 or so months, you'll be getting used to the reality of what you spend in each category, and things will need to adjust quite a bit.
That's totally fine, but it helps you to make these adjustments when you can see what you planned in contrast with what you actually spent.
To create your summary after the month is over, take a new sheet of paper and:
1. Write out all of your actual income you received for the month, and write the total income underneath.
2. Write out all of your actual expenses and how much they actually ended up costing you, write the total underneath.
3. Allocate any leftovers to a savings or debt goal (transfer or pay it now!)
4. Prepare next month's plan with adjusted expense numbers according to what you learned from this month.
Summary
Just like that, you did it! You can now easily create and maintain a budget, using any or all of these methods.
It's not rocket science, but it will help you grow your personal finances and reach your goals, so don't avoid it!
Budgeting is totally worth it and gets like 90% easier over time. It's mainly just starting out that takes a little time. You've got this.
I seriously hope this tutorial helped you start a budget! See you next time.