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Thinking of starting a budget? Do these 5 things first

Thinking of starting a budget? Do these 5 things first

Have you been meaning to start a budget for forever now, but just don’t know where to start? Or maybe you’re feeling shocked at your bank statement each month? Not quite sure if you can afford that cute swimsuit you’ve been eyeing on Instagram?

Here are some helpful things to do before you create a budget, so you can feel more confident in your spending and saving habits and make sure you actually stick to it.

1. Get your mind right

The first step in starting a budget is to get committed to making these potential spending adjustments. Make sure you’re setting yourself up for success by being realistic with your expectations. It’s very possible you’ll need to change some of your habits, so make peace with it before you even start.

2. Gather all of your monthly expense and income information

Start by collecting three months’ worth of bank account statements, credit card statements and any other regular income or expense information. Determine exactly how much you have coming in each month and use this as your starting point to subtract your expenses from.

3. Define and categorise your costs

Your expenses will fall into one of two categories: necessary or discretionary. Of course, everyone’s definition of “necessary” is different but for this case, these are things that the monthly cost is relatively consistent and you deem “necessary” to live: housing costs, utilities, gas, insurance, groceries. (I’ll let you decide where to put your mobile phone bill).

Eating out, shopping and entertainment are considered discretionary categories. While you should review and critique costs in both categories, discretionary spending is likely where you’ll have more room to see if your personal spending habits are on track or if you need to cut back on certain items.

4. Assign values

Look through your three months of expense data and get an idea of what you usually spend in these categories each month, then assign values to their budgets respectively. Start with things that are consistent from month to month, like rent. Then, figure out an average for items that are a little more irregular, like groceries.

Next, I would highly recommend (beg of you even!) to determine a consistent amount you can put aside for savings each month. Make it something that is impactful, but still feasible for you to live your life.

Once you subtract the total of your necessary costs and amount put aside for savings from your income, what you have left over can be split across your discretionary spending categories.

Play with the split! Maybe your monthly spending on makeup is crazy high and you can shift some of that budget to groceries instead. Or perhaps you despise shopping but are a total foodie. Decide what your priorities are and shift your budget accordingly.

5. Include a buffer

I like using a ‘miscellaneous’ category for when random things come up and I don’t feel like they fit anywhere else in my budget. Plus, this gives you a little space just in case you do end up over budget. Because let’s be real, this is a learning process and life happens, my friends.

While I suggest putting this together using a spreadsheet like Excel (you can download most bank statements etc. in spreadsheet format), you can put this together in whatever format you’re most comfortable with. Make sure it’s easy for you to look at frequently. Check in on your spending weekly, if you can.

Remember: moving to a budget can be a big mindset shift so be patient with yourself. Now, go forth and spend wisely.

 

This article was written by Jessi Kuhlman and originally published on A Girl In Progress.

A Girl In Progress

A Girl In Progress

A Girl In Progress is a lifestyle blog for women who are working on themselves, for themselves. They believe it’s possible to strive to become the best version of yourself, while simultaneously accepting yourself exactly as you are.