How To Create A Monthly Budget Plan That Works For You
Monthly budget plans – you find yourself thinking about creating one all the time but never really get around to it. You say to yourself “I know how much I make, I know how much is in my account, I’ll be fine”.
What if I was to tell you that setting up a monthly budget plan can help you stop being “fine” and start being “great”? Saving more, stressing less, and working your way to becoming debt free all sound like positives to me.
But where do you start?
Here are 10 simple ways to build a budget plan that works for you.
1 – Calculate Your Expenses. This is the first step in getting yourself a proper budget plan. Go back and look at the last couple of months on your bank statements, credit card statements, etc. and add up how much money was spent each month. From there find out what money is spent each month on categories that are consistent and expected every month (i.e. rent, groceries, utilities, etc.).
This number will be the one that you build from. Write it down.
After that add up the total of whatever is left (money spent on eating out, Lyft rides, drinks, etc.). Write that down. This will be the number that you adjust once you’ve finished setting up your budget.
2 – Determine Your Monthly Income. Look through your pay stubs for the last couple of months from the job(s) that you have. How much do you make, on average, in one month?
That is the number on which you will base your entire budget.
3 – Prioritize Getting Out of Debt. Your first priority when creating a budget should be adjusting your numbers to make paying off any debt the top priority. You can find more on the topic of paying off student loans here. The same principles apply with credit card debt.
4 – Track Your Spending. There are multiple apps and websites that help you track your spending and give you detailed breakdowns of where your money is going and how often it is going there. Here’s a list of 12 free apps that you can use daily.
Tracking your spending will help you figure out where you can cut costs as you continue to readjust your budget plan.
5 – Divide Spending into Different Categories. Here is the best budget breakdown that I’ve found. It’s easy to understand and gives you a clear understanding of where certain percentages of your income should be going.
6 – Adjust Budget Accordingly. Now that you’ve made your budget and you feel pretty good about it don’t think that it’s set in stone. Continue to check in with yourself. Adjust your budget when your life makes changes. Pay raise? Adjust budget. Job change? Adjust budget. Picked up extra shifts next month? Adjust the budget.
Your budget should never be set in stone. It will change and change frequently. Stay diligent with it.
7 – Allow for Flexibility. This is important because there will almost always be something that comes up each month that you want to do that may not be planned for in the budget. A friend has a birthday party. Your mom comes to visit and you want to take her out to brunch. Your tennis shoes are old and you really need to get a new pair.
Allowing for some wiggle room in the budget will make these decisions easier to say yes too. Saying yes to things you want is really fun, isn’t it?
8 – Focus on Needs over Wants. This point may seem to contradict the above point so before I confuse you let me start by saying this – allowing for wiggle room is so you can say yes to things you want occasionally not yes to things you want always. Good. Now that we’ve made that clear, let’s talk about focusing on our needs.
Think about Maslow’s Heirarchy of Needs here.
Start with your physiological needs (food, water, shelter) and work your way up to the self-actualization (material) needs. Remember that personal wealth is not about what you have that money has bought you, it’s what you have that money cannot buy.
9 – Know Where Your Weaknesses Are. Become aware of your weaknesses so you can start monitoring yourself as you spend and save your money. Are you like me and can’t stop spending money on ice cream? Know this a problem and work to find a solution. Tell your significant other and/or your friends, “Hey, I don’t want to spend money on ice cream this week so don’t let me!” They’ll hold you accountable and in turn, you’ll start holding yourself accountable too.
10 – Don’t Get Upset if You Get Off Track. This one is very important. Most of the time people don’t stick to a monthly budget because they get off track once or twice and get discouraged by the whole process. Remember that we are all human and mistakes are inevitable. Don’t get mad at yourself for spending 23% of your income on fun stuff, when you only allowed for 20%. Acknowledge the weakness, tell yourself you’ll try harder next month, and re-focus.
These are my top ten tips on how I look at creating monthly budgets for myself and for others. If you think I’m missing something please let me know in the comments below!