We all get excited when it’s payday. Most employers pay bi-weekly or monthly and you know exactly when to expect that direct deposit or check sent out to you. But do you find yourself seeing that paycheck disappear at the blink of an eye?
Before you receive next month’s paycheck, create a budget to track every dollar coming in. Thinking ahead is how you will get ahead with your finances. You can create a simple budgeting worksheet on the computer using Microsoft Word or Google Docs. You can also create a budgeting journal if you prefer to use pen and paper. Another simple tool is Dave Ramsey’s Every Dollar App.
Here are some tips on how to create a monthly budget.
1. Budget Before the Month Start
Always create your budget before the month starts. Planning ahead is how you will get ahead with your finances. If you decide to use every Every Dollar you can set up your first budget in a few minutes. This budget can roll over into the next month and you can make any simple changes as needed on a month to month basis.
2. Identify ALL Sources of Income
Identify your TOTAL take home pay after taxes. This includes your full time job, part time job, or any side hustles you have going on.
3. Identify All Your Fixed Expenses
Fixed expenses are the things you pay for each month that do not change. For example, rent/mortgage, car payment, insurance – these are typically bills that you expect to pay each month at the same rate. After you have identified these expenses, write down your expected payment into your budgeting worksheet.
4. Identify Your Variable Expenses
These expenses can vary and are NOT fixed. Bills such as electricity, gas, water, and phone can vary depending on usage. Food and entertainment would also go under variable expenses as well. Since these are variable expenses, you don’t know for certain how much you will be spending that month. What you can do is, pull up a few months worth of bank statements to get an idea of how much you typically spend in those categories and write down your “planned” spending budget.
5. Be Month Specific with Your Budget
Think about any holidays, birthdays or major events for the month before you create your budget. Is there a birthday or wedding that month that you will need to spend money on? Is it Christmas time already? Make sure you look at your calendar as you create your budget to account for any extra spending that month.
6. Use a Zero Based Budget
The zero based budget simply means that you are assigning a job to every dollar you have coming into your account. In order to achieve a zero. based budget, you would take your INCOME and subtract your EXPENSES to get $0. If you have any money left after paying all your fixed and variable expenses, then you can take that remaining balance and put it towards any financial goals you may have.