Writing a budget is something they used to teach in high school, well before I made it to those hallowed halls. Along with shop and home economics classes, this life skill course went the way of the dodo in favor of teaching students how to regurgitate answers onto a standardized test. Don’t even get me started on THAT topic. My point is that high school students are graduating with everything they need to go to college — and none of the skills that will actually serve them throughout their adult lives.
That’s why I’ve decided to tackle the concept of budgeting, and how incredibly important it is. I’ll walk you through the steps I followed to finally learn how to write a functioning budget for my household, as well as some tips and tricks that might help you along the way.
WTF Is a Budget Anyway?
Everyone has probably heard the term budget at least once in their lives, but what does it mean?
To put it simply, a budget is merely a map of your income and your expenses. You write down how much money you have coming in, then plan the money you’ll be spending in the coming months.
Why Is Budgeting Important?
Have you ever had a month where you were rolling change to buy groceries because you lived beyond your means? We’ve all been there at some point in our lives — mine was before I started my freelance writing career and we were a single-income household. At the time, it was just three of us — me, Hubby and my oldest daughter — but there’s nothing more stressful than buying ramen noodles with the change you dug out of the couch cushions.
THAT is why budgeting is so important. By creating a detailed accounting of your income and expenditures, you can plan your spending so that you never have to worry about buying food with couch change again.
How to Write Your First Budget
Now that you know why budgeting is so important, you might be wondering how to go about writing your first budget. I’ll walk you through the eight steps I took.
1. Figure Out You Need a Budget
The first step is probably the hardest — making that leap and figuring out you need to make a budget. In reality, most families could benefit from setting one up, but if you’re living paycheck to paycheck or find yourself scrounging through those last days before payday, you NEED to sit down and write yourself a budget.
2. Write Down Your Income
Write down all of your income sources, whether it’s from a job, a side gig or child support and alimony. If you’ve got money coming in somehow, write it down. If your income varies from month to month like mine tends to do as a freelance writer, estimate as best you can.
3. Take a Close Look at Your Spending Habits — Through a Microscope, If Possible
Break out your bank statements and figure out where all your money is going. Some things — like utility bills, car payments, credit card balance and groceries — fall under the necessities category. Other things, like your morning Starbucks or eating lunch at the local bistro every day, are not as vital and might be areas where you can save money.
4. Don’t Forget Seasonal Expenditures
You’re always going to be spending more money around Christmas, Halloween, birthdays and other holidays. If you’ve got kids like I do, you also need to budget for things like school clothes and supplies every August.
5. Identify Your Goals
Why are you writing a budget? Are you just tired of living paycheck to paycheck? Maybe you’re trying to eliminate your credit card debt or save up for a much larger goal like buying a house. Whatever it is, identify your savings goal and write it down.
6. Make It a Team Effort
Budgeting only works if everyone in the household is on board. Hubby and I have to be on the same page, or all my careful budgeting could be ruined by one night out with the guys. I love him dearly, but if he buys a few rounds for his friends, there goes our disposable income for the month.
7. Use an App or Automate
There are so many budgeting apps and websites out there, so take advantage of them. Some use Facebook chat and have an interactive AI that can tell you if you can afford to purchase something and what your new budget will be after the purchase. Others give you the tools to track your income and expenditures more efficiently. While you’re at it, automate your necessities. Most banks give you the option to set your bill pay on a schedule, and most companies offer an auto-draft or auto-pay option to help you keep your bills paid on time.
It might seem complicated, but there are plenty of tools out there to help you. I, personally, love Mint for overall budget tracking, and Cleo for everyday questions about my budget. (Note: These are not affiliate links, just useful apps that I love.)
8. Review, Review, Review
Finally, even if your income or expenditures don’t change much, make sure you’re reviewing your budget monthly. You might notice something in month three that could help you save money that you missed when you set up the budget.
Avoid My Mistakes
It’s easy to make mistakes when you’re first budgeting. Here are some of the ones I made in the beginning that nearly capsized the entire budget ship:
- Not Budgeting for Seasonal Expenditures: When my oldest started pre-k, I didn’t have any wiggle room in my budget for new clothes or school supplies. I budgeted for everything else — Christmas, birthdays and even the occasional summer trip to the local zoo, but I forgot about school supplies. Cue the world’s most epic facepalm.
- Treating My Budget Like the Pirate Code: A budget is not like the Pirate Code. Treating it as a guideline or suggestion rather than a set of hard-and-fast rules will come back to bite you.
A Few Closing Thoughts
Budgets are useful tools, as long as you stick to them. It takes some practice, but it can help you break the paycheck-to-paycheck cycle. Take the time to sit down and take a close look at your finances. You might be surprised where you can cut a few corners to save money in the long run, especially if you’ve got some big goals in mind.