I will admit that I used to be really bad at budgeting. Money would come in and I would pay things and then if there was anything left over I would spend it. It wasn’t really a great way of doing things, in fact it was a pretty bad way of doing things. So I put on my adult panties (you know the ones, with lots of elastic and support.) and sat down and started budgeting properly.
You might be wondering why it is important to budget. You never have enough so why do you need to write that down on a piece of paper, right?
I hear you!
But the reality is it is so important to know your numbers, really know exactly what you are earning and what your expenses are. Once you start seriously analyzing your expenses you may be really surprised where your money is going. You may find it is actually all the little things that are sucking your finances.
So how do you draw up a budget?
Be honest! No seriously, when you are drawing up your budget you have to be prepared to be completely honest with yourself and your money!
Write it down. So I know you probably think you have an idea in your head of what your income and expenses are. But when you right it down, you might see your numbers aren’t really right. Well this was the case for me anyway.
So get out some paper or start and excel spreadsheet or download a pretty template. It doesn’t matter where you write it, just get it onto paper. This is important so that you see exactly what is happening with your money and more importantly so you can plan!
What is your income? This is a simple answer if you have a 9-5 job where you earn the same amount of money each month. It is not so easy if you freelance or have multiple streams of income that differ. I have multiple streams and I generally just count the one and view the others as nice to haves but now they all form part of my income and even though the amount differs I am now able to average it out.
Track your expenses. This is the tricky part. Your fixed expenses are easy to record – your bond, car repayments etc are all fixed amounts that change annually so it is easy to add them to your budget. But the variable expenses like groceries, petrol, entertainment are all a little harder to budget for.
If you are doing a budget for the first time go back and create a budget for at least 3 months so figure out an average. If you don’t have access to this start tracking your expenses. Write down every single thing you spend your money on. This is where being honest is important. Write down the take out coffee, the work lunches and the late night chocolates from the petrol station.
Categorize. Once you have all your expenses written down, categorize them. This is an important part of the budget as well, it allows you to see at a glance how your money is being spent. When I did this I was shocked at how much we were actually spending on groceries, it was almost double the amount I had in my head!
Now you can plan!
Once you know exactly what you are earning and what your expenses are, you can start to plan. You might find you do actually have money you can save each month or that you could put more into paying off debt. You can work on cutting down on certain expenses.
Once you know exactly what your money is doing, you have control over it. It is can be really liberating knowing you decide where every single cent is going and it can relieve a lot of stress when you have a realistic idea of your financial health.
If you are looking for some cool budget printables, here are a few I found that you could start with.
Single Mom Budget Binder – I love that there are goals worksheets in here.
The Savvy Couple – This is a great one if you have more than one income.
Clean and Scentsible – This is a really great family budget.
My biggest piece of advice is to get honest about your finances. Get your head out the sand, know your numbers and be real about where you are.