Building Your First Budget

“Budget” is a scary word for many people. Some people even feel that they don’t make or have enough money to create a budget. I was one of those people but after I made my first budget, I learned that I can’t afford to NOT have a budget! I had seen worksheets that had percentages written for how much each area of expense should be. But what I couldn’t figure out is what to do if one of my expenses was more than it was supposed to be. What if my housing cost exceeded the percentage allotted? I sure wasn’t able to pick up and move. So budgets were out for me. However, when I started tracking expenses, I figured out that budgeting was much easier than I ever expected.

The approach I took to budgeting was backward from anything I had read. Here is a step-by-step approach to building your first budget.

1. Write a list of everything you pay for each month. Include all of your monthly bills, such as mortgage, utilities, cable, and Internet. You will also want to list things like car repairs, insurance, medicine, gifts, and clothing. If you drink beer or smoke cigarettes you should list those as well. Anything you pay for, list it.
2. At this point you will make a sheet called “Daily/Weekly Spending.” Put all of these expenses in a column. Beside each item make 9 columns. The first column will be for how much you plan to spend on that item that week. The next 7 columns will be for the days of the week. The last column will be the total. Here is an example of what I mean:

Daily Budget Sheet

3. If you have primarily used your debit card or checks for your expenses, you can print off the last 3 months of your bank records. Using the dates listed on your bank statements, fill in a sheet for each week of each month. You will probably not have an amount in every box and you shouldn’t. Some rows will not have an amount in them at all. This is a tedious process but after recording a couple of weeks of spending you will start seeing a pattern emerge of where you spend the majority of your money.
4. After filling in 12 weeks of spending records you will have roughly three months down on paper. Be sure to add up the totals of each row in the right hand column. At the end of the month you will be able to fill in the next worksheet, called “Monthly Spending.” It looks like this:

Monthly Budget Sheet

These worksheets take a lot of time but they are so worth it in the end. In the column labeled “plan” you will not have anything listed. Going forward you will start using this column. After you have entered the amounts that you have spent, you can see where you need to streamline your spending. Looking at the amounts you have entered, decide what a reasonable amount to spend in each row is. Make sure that the amounts you decide on do not exceed the amount of money you bring in. Ideally, you want the amounts brought in and the amounts spent to match as much as possible.

The nice thing about using these budgeting worksheets is that you are in control of where your money is being spent. If something is not working for you, then you are able to adjust until you feel comfortable. In this way, you are not spending your money haphazardly and you are not wondering what is happening in your financial world because you have it all written down.