How To Start:
Step one is to know that your budget is an ongoing process. You are guaranteed to fail at your first budget. You might forget to include a category or your projected amounts for each category are wrong or you forget to track your expenses. Know you are going to make mistakes and that is fine. You are supposed to and it will take time to tweak your budget to make it work for you.
Next you will need data. Go through bank statements, receipts and any other transactions you can find going as far back as you can. From this information brainstorms different categories on what you spend money on and earn money from. Below is a modified budget template you can use as an example.
Most of you will know to have the basic categories such as rent/mortgage, food, transportation and etc. I would also like to recommend the following categories: savings, goals and surprises.
Let’s start with savings. Everyone one knows they should be saving but it is usually the first category to be dropped. People say to think of savings as your way of paying yourself first. In my opinion this is a touchy subject. When people are barely scraping it is kind of an asshole thing to say oh you need to save 20% of your salary. My opinion is to check what are your must have expenses (housing, food, and you anything else your need to stay alive). Find ways to reduce them as best as you can. Examples can be moving for cheaper rent, or getting rid of your car and using public transit. Then try your best to increase your income. This can be getting a better job, seeking government aid. Once you have that figured out savings should be your next focus.
The next category is surprises. This is basically anything that is not in your budget. These can be unforeseen events like car breaks down, emergency cab ride, giving money to a family member in need. No one can predict what will happen in life, so make room for it. At the end of the month if you didn’t use some or all of your surprise budget then you can shift that money into your savings or the last category I want to talk about, goals. This is one I think everyone should strive to have. Have something to look forward to and do not be ashamed about it. It can be a trip, hockey tickets, hand bag, whatever you want. Just make sure it is something you really want to have or do.
Up next is recording your data. I would recommend at the beginning you save all of your receipts and record transaction everyday. Make sure the process takes only 5 minutes or less and you do this at the same time every day. There are tons of free online software that you can use like Mint or Google Spreadsheets. The final step is reviewing the results.
Did you spend more than you earned?
- Look at which expenses can be reduced in the future
- Look for ways to earn more money. New job, government aid, or a side hustle.
Did you spend more or less in every spending category?
- If you spent more in a category, you can increasing amount for this category by reducing spending in another.
- If you spent less in a category, see if you can increase your amount to savings or your goal.
Did you use your surprise category?
- If your are repeatedly spending on the same time of expense make a new category. For example if you car keeps breaking down maybe having a category for car maintenance.
- If surprise excess their allotment time to increase the budget by reducing other expenses or increasing your income.