You may feel overwhelmed about not having your finances in order, or maybe you just need a plan to get out of debt — whatever your reason, it’s important to have a budget for your money. In this post, I’ll share why a budget is so important, how you can make your own budget in ~1 hour, and how I track my money with my Erin Condren Life Planner:
WHY YOU NEED A BUDGET
Having a budget is so important because it allows you to be in control of your money. When you know how much money you have, and what expenses are coming up, you can plan accordingly. You never have to “react” if something comes up because you are in control of every dollar. You will always know what’s going on in your bank account because you plan where your money should go before you get it.
When you have a budget, you have a plan. You can start mapping out bigger goals for your life and your future. Have you started saving for retirement? It may seem far off, but with compound interest, it’s in you best benefit to start as soon as possible. Maybe you don’t have any money at the end of the month right now to put toward retirement, and that’s ok too — but with a budget, you can evaluate your spending and make adjustments as needed.
With a budget, you also have a plan to eliminate any debt. Having debt makes it difficult to get ahead. Car payments, credit card payments, student loans, etc. The payments that you make each month on things you bought in the past can eat up a lot of your monthly income. Wouldn’t it be amazing to get to keep that $250/month in your pocket instead of having a car payment? A budget is the tool you need to climb out of debt and keep your money in your pocket.
HOW TO MAKE A BUDGET
So, you want to make a budget and get out of debt. Here’s how to get started:
1 | Gather All Your Financial Information
Get everything together — this may just mean pulling out your computer and logging on to your different accounts, or pulling out your paper statements. You want to get your pay stubs for all your income and also all your bills/credit card information.
2 | Create a Spreadsheet / Organize
Now that you have all your financial information together, let’s start creating a budget. Now, a budget doesn’t have to be on a spreadsheet or even fancy in any way — you just need to be able to write out the numbers so you can see your Income and Expenses. I like using a simple spreadsheet because it can do all the math for me.
At the top of your spreadsheet, type in your Income (this is everything you earn for the month). If your Income is irregular/inconsistent (tips or commission jobs/jobs with varying overtime), just use the average of what you make per month — look at the last 3-6 months to get an accurate average.
Next, write out all of your mandatory Expenses — rent/mortgage, food, electric, phone, car payment, petrol, student loan — whatever the mandatory Expenses are. If you have debt, just include the minimum payments in this section. Look through all of your accounts to get accurate numbers for your monthly Expenses. (Notice that things like clothes, restaurants, and entertainment aren’t on this list — you can add these later if applicable).
Now subtract out all your Expenses from your Income to get your “Extra” money. You are going to tell this Extra money what you want it to do and finalize your budget. You may not have a lot of Extra money at this point — go back through those mandatory Expenses and see if you can cut anywhere. Can you reduce your food budget? Were you budgeting to eat out a lot? You can reduce your food budget if you make your meals at home. We spend ~$75/week at the grocery store and make most of our meals at home (2 adults).
3 | Make a Plan / Dave Ramsey’s Baby Steps
Baby Step 1: If you are just starting out, he suggests putting $1000 into savings for an emergency fund. So, you would take your Extra money and put it into a savings account that you could easily withdraw from in case of an emergency. (Don’t leave this in your checking account — put it somewhere separate, and never touch it).
Baby Step 2: If you already have $1000 in an emergency fund, put all of that Extra money toward your debts. So, make a list of all your debt, smallest to largest. Include everything you owe — credit cards, student loans, car payment, personal loans, everything. Then, you will focus on paying off the smallest debt first until you are Debt Free! This step may be long and hard, but it is so worth it. In order to build wealth, you must get out of debt.
Baby Step 3: After killing all that debt, you probably feel a huge sense of relief. I know I am so much happier not having the burden of student loans and car payments. I didn’t even notice the weight on my shoulders until we made that last payment and I felt so relieved. Next, add to your $1000 emergency fund until you have 3-6 months of Expenses saved up. It’s at this Baby Step that I would start incorporating the fun things back into the budget — new clothes, restaurant budget, entertainment.
4 | Follow the Plan
A budget may sound restrictive, but it is really very freeing. Once you’ve made a decision where your money will go for the month, you no longer have to worry if you have enough in your account, or feel guilty for your purchase. If it’s on the budget, you can feel confident in your decision.
In order for the budget to work, you have to stick to it. I use my Erin Condren Life Planner to help me stay on track as you’ll see below. Just be sure to pre-plan your purchases; don’t get caught up in impulse buys. I always make lists for the grocery store, or really just everything and I track it in my planner — If it’s not on the list, we don’t buy it. Check out my other tips below:
HOW I USE MY ECLP TO TRACK OUR BUDGET
I touched on How I Set Up My Erin Condren LifePlanner + My Monthly Budget in a previous post, but I want to talk you through each section I use and how I use my Erin Condren Life Planner to make financial goals, track our monthly budget, and monitor our progress towards our financial goals. *Also, right now through March 31, 2017, the Erin Condren Life Planners are 50% off! If you are new to Erin Condren, you can get an additional $10 off your first order when you create an account through my link.
There is a Goals Section in front of each Erin Condren Life Planner (ECLP). In January, this is where I wrote out a bunch of goals I had for the year and just in life. I love how this is a dedicated section in my ECLP because I take my planner everywhere and it’s perfect having my goals front of mind. Last year I wrote down that we wanted to pay off our cars and student loans to be debt free and it was such an accomplishment to be able to check those things off of my Goals.
Use your Goal pages to remind you what you’re working toward — maybe a vacation, a new car, getting out of debt, a wedding, or a new phone. Whatever the goals are for you, write them down.
As I mentioned, I am always writing out my shopping lists and then checking things off. If it wasn’t on the list, then we don’t buy it. It really forces us to think about the meals we want to eat for the week and to go through the things we already have. I use the colorful, horizontal LifePlanner and I love the lines and the space I have to write for the day.
Here’s an example of my monthly budget and how I put it in my Life Planner. Like I mentioned, I take my planner everywhere, so it’s perfect to have my budget in there. I just print out my spreadsheet and tape it in the beginning of the month. Whenever I make a purchase, I track it in my planner on my budget. Then I just check the box for each category once it’s been paid. I also love how easy it is to navigate my ECLP with the monthly tabs, so I can look back at previous months or forward to future ones.
Progress Towards Goals
In the back of the Erin Condren LifePlanner, there are blank and lined note pages as well as these grid pages. I like to visualize my progress towards goals so I just draw out a progress bar and fill it in as we get closer to whatever it is. It’s just a fun way to keep you on track and see how all of your hard work and sacrifice are paying off. I like how I can keep everything together all in my one life planner; it makes it easy to monitor my budget and track my progress all in one place.
I hope this post has helped you create your own budget and that my tips for how I track money in my Erin Condren Life Planner gave you some inspiration. If so, please share this post on Pinterest. Don’t forget, you can get $10 off your first Erin Condren planner purchase with my link and all planners are 50% off right now through 3/31/17.