Currently, only 1 out of 3 people has a detailed budget with categorized areas of spending. If you don’t currently track your spending you may be shocked to learn exactly where your money is going. If you can locate an extra $100, or even an extra $20 here and there—it can go a long way in paying off debt and contributing to your savings. Here’s how to create your budget.
Define Your Budget Categories
Before we get to the numbers, you want to create a spreadsheet with the spending categories that apply to you. The categories will vary a bit from one person or family to the next. Categories should include:
- Utilities—including cable, Internet, & smartphone
- Car Payment
- Clothing & Accessories
- Personal Care
- Dining Out
- Entertainment & Extracurricular Activities
Budgeting Each Category
Now it is time to look at your bills, current spending habits, and monthly income—and determine how much you can spend in each category. Some areas are fixed, such as your rent—while others are variables, like your monthly power bill. Set a budget for each, and maybe even divide the list by fixed or variable.
Doing The Math
Utilize Google Sheets or Excel to keep your spreadsheet organized, then set up a simple formula to do the math for you. Then, once a week or once a month—got through your budget to make sure you are hitting your targets, and to see where you can improve. Once a week might be easier, as you might not recall exactly what it was you purchased at Target 3 weeks ago.
Also, check to see if your bank offers any free online budgeting tools that will help do some of this math for you—or use an app to create your budget.