9 Simple Steps To Create an Achievable Budget

Whether you’re just starting to manage your finances or have been doing it for years, budgeting is a tool that can transform your financial life. When done correctly budgeting can bring about financial security and in the long-term financial freedom. Knowing how to budget can help you with managing your finances as you determine exactly where your money goes.

The process of budgeting doesn’t have to be overwhelming. In fact, by breaking it down into class steps, you can create a budget that is not only realistic, but also sustainable. Before starting you can read the article 7 Amazing Reasons to Budget. Here are 9 Simple Steps to Create an Achievable Budget:

1. Understand Your Financial Goals

It is important to take a step back and reflect on your financial objectives. Before crunching numbers, ask yourself what do you want to achieve? Are you trying to pay off credit card debt? Be Financially free? Build an emergency fund? Save for a dream house or car? Plan for retirement? Put money away for that vacation you’ve always wanted?
Having clear financial goals will help you guide your budgeting decision, and it ensures that you stick with it. This is very important as it will keep you motivated on days that are tough.

2. Be Willing to Put in the Work

Now that you have thought about what you would like to achieve. You will also need to dedicate a couple hours to ensure that you complete your budget. Of course you can take breaks. Budgeting requires determination and a willingness to see it through.

3. Access Your Present Financial Situation (Income)

Before you can create a budget, you need to know where you are financially. You will first need to gather information as it relates to your income. Make a list of all your sources of revenue. These include but not limited to your:

• Salary
• Tips
• Saving/Investment Dividends
• Side hustle
• Freelance work
• Royalties
• Any other regular income sources

Helpful Tip: If your income varies slightly from month-to-month use an average which is as a good estimate so that you can create your budget.

4. List Your Expenses

Next you will need to make a list of your expenses. Expenses are both fixed expenses and variable expenses and debts.

• Fixed Expenses: Fixed expenses are bills and payments that are fixed charges. Some of these include cable and internet bill, utilities, cell phone and data services, subscriptions, rent, mortgage, 401K contributions, insurance, loans, and memberships.
• Variable expenses: These are expenses that usually fluctuate from month-to-month. The include groceries, dining out, transportation, entertainment, and certain utilities.
• Debt: Financial debt is money that is owed. These can include medical bills, student loans, and unpaid credit cards to name a few.

5. Compare Your Income vs Expenses

Now that you’ve listed both your income and expenses and have told them it is time to begin the comparison. As you are analyzing, ask yourself the following questions:

• Do you have money left over at the end of each month?
• Am I living from paycheck to paycheck with little to no money to spare at the end of the month?
• Are you in debt?

Helpful Tip:

• When tallied, if your total income exceeds your total expenses, then you’re in the green. Therefore, this means you have extra money at the end of the month. This can be used to invest, save or pay down debt,
• However, if you’re expenses more than your income, then it means that you are spending more than you earn. Adjustments will have to be made so that you can cut back on your spending or you will have to find ways of earnings more income.
• As you begin to understand your financial situation, you begin to see the full picture. Now you will be able to determine exactly where your money is going, and you can also find ways of making adjustments.

6. Building Your Budget

Finally, it is time to begin creating your budget.

• Using the income and expense information that you collected earlier, create budget categories.
• Give each category that you identify should have a spending limit based on your income and your financial objective. See the example below. Your expenses may differ, so feel free to add or remove what does not apply to you.

Example of a Budget of $5000.00

Expenses	Planned Amount	Actual Amount
Fixed Expenses
Rent/Mortage	$1200.00	$1200.00
Groceries	$500.00	$500.00
Utilities	$250.00	$250.00
Insurance	$200.00	$200.00
Transportation	$275.00	$275.00
Childcare/Education	$700.00	$700.00
Subscriptions	$39.95	$39.95
Savings	$1250.00	$1250.00
Variable Expenses
Eat – Out/Takeaway	$200.00	$220.00
Movies/Mall	$100.00	$98.00
Fitness/Recreation	$140.00	$165.00
Healthcare	$100.00	$100.00
Grand Total	4954.95	4997.95
Extra Income	Total Income – Actual Amount	$2.05

Helpful Tip: It is normal for your initial budget to have some areas that may require adjustment. Budgeting is a process so don’t be discouraged if everything is not perfect right away.

7. Follow the 50/30/20 Model

Initially, when you are creating your budget, you may want to follow what financial experts called the 50/30/20 budgeting model. Assign 50% for needs, 30% for wants and 20% for saving and debt repayment. Notably, a you get familiar with your finances and gain experience with budgeting you can adjust the percentages of the model.

For instance, if you are earning $4000.00 per month then you will allocate $2000.00 for your needs, $1200.00 for your wants and $800.00 for savings.

Helpful Tip: In time you can adjust your spending habits so that you can allocate more of your money towards savings. For example, you can work towards a 40/25/35 model.

8. Use Tools to Keep You on Track

Once you have created your budget, you are all set. Your plan is ready to be implemented. It is critical that you stay stick with it and track your spending. Additionally, there are many budgeting tools available, which can be used to help you stay on track. These range from basic pen and paper, software and mobile applications. Some popular digital tools include:

• Microsoft Excel: This is a good old fashion DIY method. Here you create your own categories and track your progress. Personally, this is the method that I use to keep track of my spending. For your convenience, I have created a template that you can download and track your spending. You are free to edit and make changes so that it is a personalized tracker for your needs. Click here to download.
• EveryDollar: Every dollar is a simple budgeting app that is recommended by many. It allows users to plan and check their monthly expenses
• Mint: Mint is a free app that tracks your spending sets budgets and offers financial insights.
• YNAB (You Need A Budget): YNAB is a paid application that helps you manage your money.

9. Be Patient and Stay Consistent

As you begin budgeting, I want to encourage you to be patient. It may take a month or two before you get the groove and begin to align your spending with your income. Eventually, it will become part of your lifestyle. This is the hope that I have for you. While you might not always stick to your budget exactly as your plan, the key in all of it is to be consistent. It is important to review your budget regularly and make the necessary changes so that you can accomplish what you are setting out to do. Even if it is just a couple dollars you are cutting back on at the beginning that’s a win for you!

Final Thoughts

Budgeting is a lifestyle that requires patience. However, one’s done correctly. You can bring about both short term and long-term benefits. Moreover, the ultimate goal is to have a strong financial future, and it begins today. Take control of your finances. Give yourself the opportunity to be financially free by being intentional and making wise decisions with your money.

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