Download the customizable budget & expense worksheet.
One of the best things you can do for your future is to create a monthly budget.
There are a variety of excuses that people give for not having a budget. They don’t make enough money, they don’t have time, they don’t want to be “told” what to do with the income they bring in. The list goes on and on.
The fact of the matter is that when used correctly, budgeting can actually be fun. If you were saving more and spending less, would you be happier? Wouldn’t that make you excited?
Having a monthly budget is the number one way to stay out of debt and save money. Without one, you may be setting yourself up for financial hardships in the future.
Below are tips on how to create a monthly budget.
Track your expenses and income.
You will want to track every single penny that you spend for at least one month (3-6 months is ideal). This includes groceries, gasoline, clothing and even those little purchases that really add up such as magazines, small toys for the kids and your daily coffee.
Keep all of your receipts and put them in one spot in your home (we keep ours in a little basket on my desk). At the end of every week, go through your receipts and update your expense tracking sheet.
Carry a notebook and record all expenses in there, as well. It doesn’t help to write “spent $50 at Walmart”. What did you spend that money on? Groceries? Clothing? Office supplies? Be very detailed when you write down what you are spending so you are aware of where all your money goes.
You should also track what your monthly NET income is (the amount you take home after all expenses, such as taxes) for at least 1 month. If your income fluctuates, a minimum of 3 months is required. Add all 3 months together and divide by 3 to determine your average monthly income.
At the end of the month, subtract your expenses from your income. Do you have a positive number? If so, good for you! If you have a negative number, this means that you are living above your means and are digging yourself into a big giant debt hole. Time to tighten that money belt!
Make a list of your expenses.
Now that you know how much you are spending, you need to come up with a realistic monthly budget.
If you have been spending more than you make, you will need to do some cutting back or work on increasing your income.
Separate your variable expenses (groceries, clothing, entertainment) from your fixed expenses (mortgage, car payment, school loans) to see where you can cut back, if necessary.
Write down all of the expenses that you plan to have in your monthly budget.
Don’t forget to include expenses that only come up every few months or even once a year (such as birthday and Christmas gifts, oil changes car and hair cuts).
Incorporate your financial goals.
Do you hope to own a home in 3 years? You’ll need to start saving more. Maybe you want to be debt free in the next year. You may need to increase your income to pay it off. Whatever your goals may be, incorporate them into your budget.
Goals are best achieved when they have a plan attached to them. If you don’t have a plan for achieving your goal, it’s just a dream.
Have a monthly budget check-up.
At the end of every month, tally up everything you spent for each line item in your budget, making sure you did not spend more than you made.
If you have a spouse, it’s important that you both look over the monthly budget every month so that each of you knows what is going on with the finances.
Budgets do not have to be boring and self restricting. They are simply a way to keep your spending in check.
Don’t get discouraged and throw in the towel if you go over budget one month. Try harder the next month and you will see that over time, living by a budget is really quite easy.
The biggest problem for us is actually sticking to a budget. HELP!
Thanks for all the advice i love using coupons and saved alot so far!If only the tellers werent so anal and understand that a purchase in the dictionary is one thing which would be one item!thanks i have always kept a budget too!
Hey Jess! – We have a spreadsheet that hubby made at the end of 2010. It tracks my coupon savings, rewards program earnings and then of course, our expenses. I used to do it manually but found that it was WAY too much work.
we suck at budgeting, we always go above our budget – especially when it comes to groceries. i think it’s because we buy organic, fresh fruits, veggies and they only last for like 5-7 days and we have to shop like once a week for it.
also, crazy expenses come up. we almost had our credit card paid off, then my vehicle needed a 45,000 mile service – which costed $279.00, which we had to put back on the credit card. we will get that dang thing paid off eventually.
we are to the point though, we pour our money into savings, toward my hub’s truck payment, paying bills, that we don’t have the extra cash left over to actually DO STUFF with.
i’d be interested in seeing your budget, as for food,gas, hobbies, etc. do you use a spreadsheet, do you manually write it down?
I just wanted to tell you that your web site has helped me a whole lot. Please continue. In the last 3 weeks I have decreased my grocery bill by $410 by watching the fliers and using coupons. Oh ya, I also organized my house so I know what I need to buy and what I don’t.
Right now I am still trying to figure out best prices in different stores. This is a slow process, but I am getting there. I know some people say that going to different stores to shop uses too much gas and time. I am fortunate that I have all stores in a close radius and I make my trips when I am out doing other things like dropping kids off at activities. So far it has worked for me. Still in the early stages.
Thanks again!!
Great article! I think having a budget is VERY important. A few years ago, when DH (DBF at the time) were living in our first apartment together and finishing up college, we had no budget and overspent every month by ridiculous amounts! Once I finished college and got a full-time job, I realized that our overspending had caused us to rack up a huge amount on our credit card. We created a budget after that, and try really hard to stick to it and have been paying down our debt since then. Having a budget helps you keep your finances in control, and not accumulate anymore debt. For the lazy budgeters (like myself), mint.com is amazing for tracking your budget! It automatically totals everything and pulls in all your transactions from your bank account. I love it, makes my life so much easier
Mrsjanuary just wondering if you were going to start postin your budget again like you use to!
amber – I used to budget that way as well, until I realized that I wasn’t paying important “bills” such as RRSP contributions and funding our emergency fund. Make sure you you have savings part of your budget!
teachermum – I’m glad you think so! I will try to write more of them.
Cassie, you already know we are on the same page with this one. I think these types of articles that you write are the most important ones on your website! Saving money with coupons makes absolutely no sense if you are just digging the debt hole deeper every month buying making other purchases you can’t afford.
Perhaps a “spending plan” sounds better to some folk–seems budget is a 4 letter word to some people…
I love your site. I’ve been budgeting for the first time over the last 3 months. I would consider it partial budgeting really just tallying income and then bills and figuring out what the leftover money is. Now that I’ve gotten used to that I can start throwing groceries and expenses in. I love the receipt basket idea and will start doing that. I will also make my spouse sit down with me and go over this, sometimes I feel he doesn’t understand the value of a dollar lol.
Hopefully we can save enough to buy a computer and printer soon, then my couponing can really go to town! But we are expecting twins and have a blended family with 3 kids already so who knows when that will be possible! Any coupons for PC’s let me know!!
Thanks for the great tips!!!
-family of (to be) 7
pawsitivelife – Oops! Those are to be posted next Monday.
Mia – Aw, thank you. I’m so glad you find them helpful.
Melanie – Sometimes things happen for a reason, and like you said, it was probably a good thing you lost your job!
I just recently lost my job (don’t worry I got a new one where I really wanted to work 2 days after I got laid off) and now (after 5 years) my husband finally agreed to go over our finances and make a budget…and to stick with it. He even wants to us the jar system for the annual stuff, car repairs, home renos, etc.
Losing my job was actually a good thing since I finally got my husband to understand planning is important. Our salaries can go away any day so you have to have that emergency fund.
You have the greatest posts and article ideas!!! Very practical, well-organized, well-written, informative… I can go on.
I really like the idea of budgeting those yearly expenses such as haircuts and birthdays… I always forget about those and they throw me for a loop. I`ve always been TERRIBLE at budgeting because I just can`t stay consistent with it. But I might give it a try again… maybe all the savings I`m racking up from coupons will motivate me to keep track of how much I`m (hopefully) saving up each month and where all the money is going to!
Keep all the great blog posts coming please!!!
Hello Mrs Janurary,
The links to the budgets dont work