Budgeting
What’s most important to you? What really excites you and gives you energy? How would you like to be able to focus on those things? Creating a budget can give you control over your finances to make that happen. Then, when you have a clear focus as to “why” you are creating and following a budget, then you are more likely to stick with it. Finances are 80% behavior and 20% head knowledge (Ramsey), which means that knowing how to budget is a small piece of the pie. Being motivated will allow you to stick with behaviors to develop good habits for a lifetime.
Creating a budget is one of the first steps you must take in order to become financially prepared. There are many different methods of budgeting that work. It's important to find the method that is right for you. Want to discuss budgeting with your MoneyCoach?
Budgeting Methods
The below budget tracking methods will help assist you in obtaining a financially fit future.
Budgeting Apps
Every Dollar App and Good Budget App are zero-based budgeting apps designed for budgeting monthly expenses.
What Is a Zero-Based Budget?
The concept of a zero-based budget is simple: income minus outgo equals zero. If you earn $3,000 a month, you want every item that you spend, save, give, or invest to all add up to $3,000. That way, you know where every one of your dollars is going. Not knowing where money is going is the biggest roadblock to being financially sound. With money flying out the door unchecked, you could look up one day and find you have no money—and no clue about where it went!
Here’s How to Make a Zero-Based Budget:
- Write down your monthly income.
- Write down your monthly expenses.
- Write down your other expenses.
- Subtract your income from your expenses to equal zero.
Budget Worksheet
You may prefer to maintain a hand written budget sheet. Click on the link below to access the student budget worksheet. You can create a budget for weekly, bi-weekly, or monthly incomes. The budget worksheet is easy, just write down your expected expenses in the "Budgeted Amount" area and enter the amount you actually spent in the "Actual" column. Then subtract "Actual Expenses" from your "Net Income" to determine your "Net Disposable Income" for the month.
Envelope Budget Method
The envelope method can be used with cash or a debit card. There are risks involved with having cash on hand, so the debit card method is recommended. The cash is divided into envelopes that denote a specific category of spending. Each month, you will pay your bills as usual and then set a specific amount for your discretionary spending (groceries, eating out, gifts, etc.), which is the type of spending that many people struggle with the most.
- Create a budget of your current financial situation.
- Divide your income into areas of spending: rent, utilities, entertainment, personal care, etc.
- Create an envelope for each category.
- If you are not comfortable carrying cash, you can use a debit card to make purchases and pay bills. Just write the amount you allocated on the envelope and subtract from that amount whenever you make a purchase.
- As you receive income, fill each envelope with the amount you allotted to that particular category.
- Pay for your expenses out of the appropriate envelopes. Use the entertainment envelope for entertainment expenses, personal care items from the personal care expenses envelope etc.
- At the end of the month, put all unspent money into a savings account.
- You may need to modify your categories and amount allocations for the first few months.
- If a monthly system is not right for you, you can also try a weekly or bi-weekly envelope system.
Calendar Tracking Method
This budgeting method can be used to keep track of income and monthly bills. A calendar with larger spaces to write on typically works best.
- Write in your income on dates you will receive it.
- Indicate all bills and expenses when they are due.
- When you pay your bills, cross it off the calendar.
Tip: It's best to determine your calendar budget before the new month begins.
The calendar is a great tool for those with minimal expenses. You can also use it to track uncommon expenses that don't occur each month such as tuition or holiday spending.
