How to Make a Budget When You Don't Know Where to Start
When Bryce and I were newly married, we were terrible with money. We were basically children (19 and 20 years old), so it wasn’t really a surprise. After a few years of being stupid with our finances, we were introduced to Dave Ramsey by our church. I can’t say we’ve been angels with our money since, but with the knowledge we learned from him, we are MUCH better off now than we were back then.
Starting a budget when you’ve never had one before can be overwhelming at first, but my goal for this post is to ease your mind and show you just how simple creating a budget for your family can be.
Disclaimer: The first three months of keeping a budget will be a learning process. In this time period, you will learn what works and doesn’t work for your family and what you need to adjust. Keep in mind that you probably won’t meet your budget goals in these first three months, and that’s okay. Just remember it’s a learning process. Once you get past this, it’s easy-peasy. Promise.
Download my free monthly budgeting worksheet to make this as simple as possible.
Ready? Let’s go.
Step 1: Calculate Monthly Income
You’ll want to include everything from your monthly base pay to your side business income, babysitting money, child support, etc. Everything. If your income is different each month, just do your best to predict what your income will be, and go from there.
Step 2: Calculate Fixed Monthly Expenses
Here you’ll want to include all your month-to-month expenses. This includes mortgage or rent, utilities, groceries, insurance, debt payments, etc. Basically, these are expenses that you HAVE to pay for every month. This should be fairly easy since they are typically the same from month to month. Just don’t forget anything.
Step 3: Determine Financial Goals
Do you want to become debt free? Are you saving for a down payment on a house or land? Do you want to buy a car? These are financial goals to plan for.
Once you’ve set your goals, you’ll want to budget a certain amount of money to go toward those goals each month. Add that to your budget.
Step 4: Calculate Discretionary Expenses
Unlike fixed monthly expenses, these are expenses that you could technically do without, for example, your daily Starbucks, eating out, monthly magazine subscriptions, etc.
This part of the budget can be difficult because sometimes these expenses typically aren’t the same every month, and this is usually where we tend to go over budget. For us it’s eating out too often that gets us in trouble.
The best way to figure out what these discretionary expenses are for you is to keep all your receipts for an entire month. When the month is over, simply add up your receipts and add them to the budget. You may be shocked to find out just how much money you’re spending. Don’t say I didn’t warn you!
Looking for a full budget binder to help you get out of debt and stay on track in 2019? I’ve created this 2019 Debt-Free Budget Binder! It’s the binder I’ve used for years to help us stay organized, and it’s now available to you right here in my shop! It’s 51 pages of budgeting gold, baby.
Step 5: Subtract All Expenses From Total Income
Once you’be subtracted all your expenses from your total income, you may find that you have extra money left over, or you may find that you are negative.
If you have extra money, you get to decide what to do with it. When this happens for us, I like to add this money to our financial goal, which is getting out of debt. See our October debt payoff summary here.
If you find that you are negative, don’t freak out! This just means you should take a look at your discretionary expenses and see where you can cut back, OR it means you need to figure out a way to bring in more income.
Only you can figure out how to do this, but in this day and age, it isn’t hard to find a way to make extra money. Read this post to see how I make money online.
Everyone has a skill that is worth something to others. Mine is my ability to find errors in written text, and my husband’s is his ability to fix things. He has a handful of clients that call him on a regular basis to come over and repair or replace something. It’s been a great side business for him and a blessing for our family.
Now it’s time to get started!
Starting a budget isn’t hard when you know the steps to follow, but I promise it is worth it when you start meeting your financial goals.
Don’t forget to download my free monthly budget worksheet!
I hope this was helpful for you. Let me know how your budget journey is going in the comments below.