DISCLAIMER: If you’re not self-employed but still want to create a budget, never fear. Your Step 1 is here.
The goal of this step is to create an expense map. We’ll work on decreasing your spending, creating your budget system, and growing your money in later steps.
Get out a piece of paper and a pen. If you’re more of an online/app person, we’ll get to that, but for right now, it’s much easier to get it all out on paper.
- Since you can’t predict the exact number you’ll make each month, write the least you’ve made in a month on the first line. If you budget according to that number, you’ll most likely have more than expected each month. Think of all of your bills and write them down. Use my list of budget categories to make sure you’re covering everything. When you’re done, add up the numbers and draw a horizontal line under it.
- Now consider your recurring expenses. How much do you usually spend on groceries? If you’re not sure, put a higher number, or one you feel comfortable is accurate. If you have absolutely no clue, go back to your credit card statement and add up everything you spent on groceries in the last month. Add it on the line under the horizontal line you just drew.
- Think of other expenses you have during the month: charity, gas, manicures, restaurants, etc., and add them on as well. Use the list of budget categories for this too.
- What about household expenses like shampoo and laundry detergent? These are hard to budget for because you tend to buy them sporadically; when they run out, you run out to a store and buy some more randomly. This is inefficient and expensive and we will change this! But not today. In the near future, you’re going to make a household storeroom and stock it every few months. But for now just put an estimate of what you think you might spend on these sorts of things and add it in.
- Add everything up underneath the horizontal line. Add that number to the total of your bills. Now add subtract that total from what you earn. See what’s happening with your money. Do you have enough to cover everything? Can you put aside money for savings? In the next step, we’ll talk about where you can make cuts; cutting your cable, for example.
Do you have money left over? Great! Hold on to it for now because if your expense estimates were off or you forgot something, you’ll need that extra money.
Once you’re satisfied you have everything clear on paper, you’re done with the step!
In Step 2, we will create our budget battle plan. See you there!