The cost of building a life isn’t. We all know expenses exist, but the numbers keep adding up—rent, water, trash, electricity, cable, Internet, car insurance, renter’s insurance, gas, cell phone. It all feels a bit much.
Managing money is intimidating, but it’s 100 percent doable—and it’s pretty darn necessary if you want to be in control of your dollars. Dive into a digital finance manager, excel sheets, worksheets and a homemade bill binder.
According to a Gallup survey, only one in three Americans prepares a detailed household budget.
There are tons of tools—online and other—to help you figure it all out. And if you’re not a recent grad but someone who just wants to get those dollar signs situated, a budget’s a budget—it doesn’t discriminate, and everyone should have one.
Like Dave Ramsey, a personal finance expert, says: “A budget is telling your money where to go instead of wondering where it went.” So, here are tips to boss around your bank account, aka how to create a budget:
1. Figure out how you’re spending your money.
Check out your expenses from last month and then categorize each transaction. Some basic categories, but definitely not all possible ones, you can start with include:
- Housing, including rent or mortgage
- Car payments/insurance/gas
- Health/medical expenses
- Groceries/restaurant expenses
- Credit cards/loans/other fees
Categories are not limited—they should be customized to your own spending habits and responsibilities. The role of sorting is to wrap your head around where your money is going right now.
2. Calculate your total monthly income.
Start with your after-tax number and then subtract what you spent from month start to month end. Did you overspend? That’s a big red flag—you need a budget. (And, really, you need one whether you overspend or not.)
3. Analyze your spending.
Start with the previous month to see what categories are flexible—what can you cut back? You’ve got to pay rent on the first, but do you have to eat a Chipotle burrito bowl every week? Didn’t think so. It might help to separate your categories into essentials and nonessentials, or extras.
Remember: just because it’s an essential expense doesn’t mean you’re not overpaying. Analyze your expenses like car insurance, which can increase if you’ve recently been ticketed or in an accident. Compare offers from big names like Progressive, Insurance Navy, and Geico to get an idea of what discounts are available.
4. Set goals and adjust your expenses.
Be realistic when you’re setting budgets for each category—you need to eat (groceries), but you probably don’t need that chevron maxi skirt (shopping/clothing).
5. Write it down as you go.
You need to track your spending over the next month (and on) to understand, modify and stick to your budget. Try not to stress the first month. It takes a little time to get it down; give it at least two or three months to settle in and become habit.
6. Don’t ditch the budget.
This is something that happens after the planning stage. By sitting down each month and comparing your actual expenses to what your goals were will help you stay on track.
Photo by @paullynn/Twenty20