Everyone needs a budget to keep their money organized. A budget tells you how much money you have, what it’s being spent on, and how much you have left to plan with. There is no way to tell if your goals are being met without one. Budgeting doesn’t have to be scary or difficult. The best budget to start with is the one you aren’t afraid of. Creating a budget shouldn’t be torture, but a tool to regain control of your finances. Where do you begin and how do you maintain a working budget?

“It always seems impossible until it’s done”

-Nelson Mandela

Begin by thinking about the difference between your wants and your needs. You don’t need to have brunch with your friends, but you do need a place to live. Your needs should be your priority when creating your budget. These are also known as expenses:

  • Fixed Expenses are things that generally stay the same from month to month. Such as your rent/mortgage, credit cards, and car payments.
  • Variable Expenses are expenses that change from month to month. Things like utilities, groceries, or gas.
  • Total Expenses is the total of your Fixed + Variable Expenses

Next, let’s take a look at your monthly income. Some people have a reliable income they can depend on every month in order to do their budget. They can immediately fill in their numbers. However, many people who are self-employed or working off commission have fluctuating incomes. This means they could do so good one month, but totally flop the next. The best thing to do in this situation is find a baseline income. I suggest looking at your income over the last year (if possible) and finding your average monthly income to work from.

  • Stable Income– total monthly amount deposited into your checking account
  • Variable Income– Average monthly earnings over a 12 month period

The most simple budgeting method possible takes your Monthly Income and subtracts it from your Total Expenses. Whatever is left over is money you can allocate towards your wants and goals. It is best thought of as a way to empower you to make more confident purchases and also, of course, save money for a rainy day.

Monthly Income – Total Expenses = Spending & Savings

There a few different ways to help you keep track of and maintain your budget. You should try various methods and see which one works best for you!

  • Money apps have become a popular and convenient way to keep track of your budget. Apps such as Mint and YNAB have instant access to your checking account and have many cool features to help you track your finances. All in the palm of your hand.
  • Budgeting software, like Quicken can calculate anything from simple budgets up to complicated multi-business finances. This is software you use from your computer and can control/track things like your banking transactions, bill payments, and spending. It can even help you create retirement portfolios and give advice on debt reduction.
  • Spreadsheets are a simple and useful tool to see how your hard earned money is being used. You can create categories and enter all of your purchases and expenses. Excel can automatically calculate your columns and help you plan your budget. Templates are a quick way to get started with budgeting spreadsheets.
  • Envelopes is an oldy but goody in the budgeting world. With this method, you write down what the money is to be spent on and how much onto an envelope. That way you have cash and know exactly what is going towards bills and what is going towards that purse you’ve been eyeing at your favorite boutique. There’s even a modern version that helps you figure out your numbers and prints envelopes for you called Mvelopes.