How to create a budget – A free online budget spreadsheet
Okay y’all it has been a couple of weeks since we started this journey and it has been a pretty rough one. With the oldest graduating from high school and the youngest graduating from middle school, on top of trying to catch up on bills things have been JACKED UP! All of these school fees and stuff have been nickel and diming me to death!
Thankfully I have had some experience with a number of financial education programs in the past so now that we are ready to get back on track, it is much easier for us to jump back into things.
I know that this may not be as easy for some of you, so I am going to list some specific tips in addition to the ones in my previous post about getting out of debt, that are specific to how to create your budget.
What is a budget?
One of the most important things to understand about creating a budget is to understand what a budget is and what it isn’t. Here are a few things to remember:
A budget is:
- A plan
- A way to see where your money is going
- Yours to personalize
A budget is not:
- Going to always be the same
- Going to make money appear from nowhere
- As stressful as you think
A budget is just a way to see what money you have coming in and what money you have going out. Many people don’t even realize that this is something you should be looking at and it is a major reason many people live paycheck to paycheck.
Why you need a budget
How much did you spend last month on groceries? How much did you spend on gas? How much money have you spent in the last few months going to Starbucks or shopping at Target?
Most people that you ask this question won’t be able to tell you the answer. This is likely because they don’t have a budget.
There were months and months when we never looked at our spending. We just swiped our cards like the money was endless. We make a decent amount of money but could never figure out why we were broke.
A few years ago I sat down with my first personal finance coach. One of my first homework assignments was to sit down and go through my last few months of bank statements. I had to have a category for every single transaction that was made in those 3 months.
The results were GUT WRENCHING! I am too embarrassed to tell you all some numbers but here are a few categories and what we averaged over those three months:
- Personal Shopping (Almost $500/month)
- Starbucks/Coffee (Over $100/month)
- Dining Out (Over $300/month)
You probably get the point by now. Before this exercise my coached asked me how much I think I spent on these items per month and I can tell you my numbers were nowhere near these amounts. All of this was BEFORE I got into how much we were spending on our monthly bills and necessities.
If you do not have a budget you will be like me. You will find yourself going month to month spending money that you probably don’t even have and you don’t even realize how much of it you’re spending.
How to create a budget plan
Creating a budget is not hard and it can be fun especially once you start seeing progress. The first few months will be an adjustment. So don’t give up if you don’t get it right on month one, or month two, or even month six….actually if you don’t have it by month six contact me directly because I may be able to help. But you should be able to get it by then.
Don’t forget there is no wrong answer to this. It is simple grade school math. We need to know how much money is coming in, how much is going out, and how much is left. Income – Expenses = Cash Balance (and you can use that cash balance to pay down debt if you have it).
First on the left side of your list you need to write down your monthly income. If you make a regular salary this will be easier at first because you can just add up your paychecks (2 if bi-weekly, 4 if weekly, etc.).
If you have an unconventional pay structure, for example you get paid only commission, I would take your last 3-6 months of income and get an average to set your monthly income.
I know all of this is probably a lot and you may want to bang your head against a wall but we are almost there………….
Now on the right side you have to list your expenses. Start with your necessities because these are the things you NEED to live. These would include things like rent/mortgage, lights/utilities, groceries, gas, and car insurance. You want these at the top because no matter what, these are things you will need to have and likely can’t change what you will have to pay on these.
For items like gas for your car or other fluctuating expenses, get the average over the past 3 months.
Next on the right side of your list write out the rest of your monthly bills and debt (cell phone, car payment, credit cards, loans, etc). Make sure that ALL of your bills are listed so that your budget is as accurate as possible.
Once you have the total we need to be sure that your cash balance is positive, 0 or negative. If it is positive GREAT! You can use that number to pay off additional debt (which we talk about in another post). If it is negative, you will need to make some adjustments.
To our surprise this number was nowhere close to 0. It was so negative that we had to make a lot of adjustments in our budget and do some creative things to get it back on track. It took some real soul-searching to do this. We had to call some creditors and make some sacrifices. That may have to happen if you see you have a budget that is upside down.
Whatever you do don’t worry. Trust there is a way to get out of the hole that you have dug yourself into. Trust me we have done it and are still digging out. The biggest thing to remember is that you don’t want to dig yourself deeper in. So be sure that you know where your money in your budget is going.
Where can you get a Free Online Budget Spreadsheet
I am a huge excel nerd so I have been keeping our budget on a spreadsheet for years now. Even when we didn’t follow it, it looked really good and gave us hope LOL.
So far the easiest and best free personal budget spreadsheet that I have used can be found here. It is very easy to use and he provides an Excel spreadsheet or a traditional paper one if you’re not into spreadsheets.
Whatever you do don’t wait…..start your budget NOW!
Also, be sure to let me know when you start and how things are going. I like to see the progress you all are making.