Wondering how to create a budget?
It might be easier than you think, especially when you use the free monthly budget template (below). I have added all the necessary formulas. Just type in your information and your budget is ready to go!
Creating a budget is not child’s play, but it is a lot simpler than we make it sometimes. If one of your financial goals is to abide by a budget, your first step is to make one.
Here is how to create a budget and keep it simple:
Write down how much income you have. I recommend only counting steady income. That can be complicated if you own a business or work various hours. If you fit into that fluctuating category, look back at the last six months or so and come up with an average.
Write down all of your expenses… ALL of them right down to the coffee you purchase on the way to work. If you really want to be thorough, you will keep a register of your expenses for at least a week if not a month. Total the expenses.
Now for the hardest part… subtract the expenses from the income. If you have some money left over, CONGRATULATIONS. You have something that even the government struggles with… a balanced budget.
If your expenses are higher than your income, make cuts. Be ruthless if necessary and believe me, I understand the pain. We have been there. We even had to get rid of cable and smart phones one time because we could not afford them.
Oh, and just a note about budgeting… a surplus does not mean to go on a shopping spree. Nope. It means that you need to start building savings so that you can withstand any emergencies that might arise.
Recommended Budget Percentages
If you are new to budgeting or just wondering how your family budget stands against the average US household, these budget percentages establish a guideline.
Please notice that these percentages include a range since your family’s needs will vary greatly depending on size, location, and income level.
Whether you rent or have a mortgage, the housing category should include all fees, taxes, and maintenance required for your living accommodations.
If your budgeted percentage for housing is surpassing 30%, you might consider refinancing your mortgage.
If you are buying a car or just take the bus, all of your transportation expenses – including oil changes and gasoline – fall under this category.
This expense will vary greatly based on the size of your family and any special needs in your diet. I also include Amazon Subscribe & Save, cleaners, toiletries, paper goods, and school supplies in this category.
I tend to lump home insurance with housing and car insurance with transportation, but you can interpret this as needed and can include life and/or health insurance.
If you need daycare, pay child support, or have tuition costs, choose a budget percentage that covers all of these childcare costs.
The medical category is another expense than can vary greatly based on your family’s health, pre-existing conditions, eye glasses/contacts, braces, and regular prescriptions.
Our family finds giving a necessity. We tithe to our church and give to the community as we feel God’s leading. As parents, my husband and I are striving to teach our children to be generous.
However, this category can also include gifts for special occasions such as birthdays and Christmas.
Like going out to eat? Love the movies? Planning a date night? Stashing away money for vacation? Or do you like having cable television? Ouch! That’s a lot of entertainment in a small category, but living on a budget often means making tough choices.
The idea of investing might be intimidating. I get it. But, regularly putting money into savings is a necessity. Whether you are saving for a college education or just building an emergency fund, have room for savings in your budget.
For the majority of our marriage, our required debt payments has exceeded the recommended budget percentage. What does that mean? We cannot afford additional debt.
Make the decision now to start using credit cards wisely. As you consider using credit cards or making purchases with a loan, use this percentage to dictate the monthly payments you can afford. Then, STOP going into more debt.
If you find yourself living with debt payments exceeding 10% of your income, it’s time to increase your income. <<– That’s always my first recommendation. However, debt consolidation is also an option.
Include gas, water, electricity, garbage, and phone services under the utility category. You may not have all of these but include each that applies to your family budget.
COMING SOON: How to Save Money on Electricity
Every family has “other” items that are unique, but these “other” or “personal” expenses should not eat the majority of your budget.
Simple Budget Maintenance Tips
If you have actually created a budget, that is AWESOME! Good for you.
But now, are you scratching your head and wondering how you are going to remain faithful to it. How can you stick to your new budget?
Change your mindset
Having a budget is not your punishment. Yes, you might be stuck with a tight budget due to overspending habits in the past. That stinks. But, keep a focus on the future and the rewards that will result result from your hard work now.
Another trick your mind will play on you… you have to reject the “I deserve it” lie.
You work hard. Very hard. As a result of the time you spend earning the income you receive each month, sometimes the temptation is to splurge on something. My husband and I would say, “Hey, it’s Friday night and it’s been a long week. Why don’t we take the credit card and you can blow $50 and I will blow $50. Oh, and while we are out, why don’t we charge dinner too? Haven’t we earned it?”
No. What you have earned is the right to have a financially secure future by making wise choices today.
Keep a focus on the future.
Cancel your credit cards
Freezing those credit cards in a block of ice might seem like an effective way to stop overspending your budget but in reality, ice melts… and so does willpower.
Go ahead and call those credit cards companies and ask them to suspend your ability to use those cards while you pay them off. It will reflect on your credit report that you have chosen to close those accounts with a balance. But, it will also show that you are faithful in paying them each month.
If you want to play hardball with the credit card companies, don’t forget that you can also negotiate with creditors yourself. I have done it and survived. You can do it too.
Connect your accounts to auto-billing
If you have a problem spending your bill money each month, set up your bills to automatically draft from your bank account. I recommend setting the drafts to withdraw shortly after your income is deposited each month.
Another smart decision…. set your pay day set to direct deposit. Not only does it keep the bulk of your money out of your hands, it can also get you a free checking account at many banks.
Use cash only
The cash envelope system – made famous by Dave Ramsey – really does work when you use it. Here is how it works:
- Withdraw the amount of cash you need for expenses not drafted from your account.
- Divide the money into envelopes marked for each expense.
- When the envelope is empty, your spending for the month is over.
- If cash remains at the end of the month, you can roll it over into the next month or place it in a savings account.
Save your change
Just a simple act of keeping every penny can help remind you that you have a budget.
Make a habit of emptying your change into a jar each night and smile. Think about how you are learning and growing. Think about the future.
RELATED: Learn to grow a successful coin jar.
For our family, we believe everything comes from God. Nothing we have is our possession but rather it is on loan from God.
Everything in the heavens and on earth is yours, O Lord, and this is your kingdom. We adore you as the one who is over all things. Wealth and honor come from you alone, for you rule over everything. Power and might are in your hand, and at your discretion people are made great and given strength. O our God, we thank you and praise your glorious name!
1 Chronicles 29:11-13
This mindset turns a simple act of stewardship into an act of worship. Take the time to pray and ask God to bless those pennies and to keep you faithful. (I have to pray REALLY hard.)
Use gift cards
If you are giving yourself an allowance, why not put it on a gift card?
A generic VISA gift card can be used anywhere or you can get more specific and use a Starbucks gift card for your coffee, a McDonald’s gift card for your lunch out, and so on…
Reward yourself for successes
When you have maintained your budget for six months, allow a small indulgence.
Go out for ice cream or a movie. Do not go buy a new car. That is not what I mean and you know it, but rewards are necessary. For our family, we plan to take a one week vacation each year… and pay cash.
Learning to stick to a budget can be difficult if you are not accustomed to it but you can learn to maintain your goals. Just make these simple tips a habit.
Check your budget weekly
Sit down once a week with everyone involved with spending in your household and look at your progress using the free budget template (below).
If once a week is not practical, then schedule your finance meeting for once a month. Work together as a team to be successful in sticking to your budget and to hold one another accountable.
Free Budget Template
Subscribe and I will send you my monthly budget template that you can use in either Excel or Google Sheets. I have done the math for you! Just plug in your information and go!
Do you have a household budget?
What budgeting tips do you have for successfully sticking to a budget? Any hacks that makes budgeting easier? I would love to hear from you in the comments.
Free Budget Template
Subscribe to get the Budget Template to use in Excel or Google Sheets for FREE.