How To Prepare Your First Budget
When it comes to growing up, preparing a monthly budget is one of the biggest steps. And while it is hard to prepare one and actually stick to it, this is one thing that will benefit you in the long run and keep you out of financial hardships. As a young adult, I have learned the hard way and the problems that come along when financial planning isn’t at the top of the priority list. While I haven’t hit rock bottom, there have been times when money has been tight to non existent and it was due to a lack of planning on my part. However, if you can sit down and use the free budgeting tools out there on the web, you can prepare a budget that will set you free of all financial obligations.
I know it is hard to get things when you don’t have money to pay cash for it, that is why they have this little thing called credit, which if you aren’t careful, can really ruin things for you. But that is another topic for another day. This article is going to give you the basics to prepare your first budget. Like I said before, there are several sites/tools out there that can be used to help you prepare your first budget. So the first step to creating your budget is to download or print one of those budget sheets. Most are vague as far as your expenses go, but you can get more creative and precise when you prepare you final budget.
Once you have the budget sheet, you need to first calculate what your NET INCOME is (what you actually bring home). Your budget sheet should have a spot to write that in. Next, you want to seperate your expenses in to 2 categories: fixed and variable. The reason you want to do this is so you can tell what is going to be the same each month and where you might have some wiggle room for other things. Unless you are on a set budget with your utility companies (gas, water, electric), those will typically be variable expenses along with your food and gas for your vehicle(s). Your set expenses would be your rent/mortgage, car payment, cell phone bill, etc. Again, most budget sheets will have this laid out for you to really see what goes where.
Most people wouldn’t consider a savings account an expense, but in reality, it is. You always want to try to have enough money to pay for 2 months worth of bills, should something happen and your income stops. Regardless of the amount of money you put in the savings account each pay period, you should always have some going in there for such emergencies. So now you have what you bring home, your variable expenses (credit card, utilities, gas, food, savings), and your fixed expenses (mortgage/rent, car payment, insurance, cell phone).
The next step is very simple. All you do is add up what expenses you have, both variable and fixed, and subtract that from your income and voila! You have just created your first budget. If you do this correctly, what you bring home and what goes out should equal exactly “zero”. There is not a single person out there that doesn’t have such an abundance of money that they can’t use it somewhere, even if it is just going into the savings account. And if you are coming up with more money going out than what is coming in, you need to do an immediate overhaul of what you HAVE to have and what you WANT to have. The first month is always the hardest for anyone, but once you get through that one, reevaluate what varied between your budget and what you actually spent that month to see if there was something you missed.
This wasn’t meant to give you the complete and total run down of a budget and why this goes there, it was simply meant to somewhat guide you into creating your own budget and tell you that there are several resources out there to help with this goal. Below are a few links to help you budget and offer free budget tools.