Does the idea of a creating budget bring tears to your eyes? If the idea seems great, but you have no idea how to execute it, I can help. I’ll teach you how to make a budget for beginners. It works for single pringles, couples, families, or anybody in between. I keep it simple and to the point. I’ve included national averages to help you see roughly where you stand in the grand scheme of things.
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If You Don’t Budget You Don’t Know
I love making lists and spreadsheets. I’ve even been known to make a list of my lists, I’m crazy and ok with it. At the ripe old age of 13, I started babysitting. The money went into the savings account that my mom helped me open several years prior. Since all of the money went to the same place, I felt the need to organize it, so I made a budget.
My budget included tithing, a horse, fireworks, and spending money for vacation. I made a spreadsheet and figured out what I wanted to save annually for each category. I divided that between the months and put a sticky note in my money box. It reminded me of how much to allot to each category. Yep, at 13 I was already making spreadsheets to help budget out my babysitting money. I am and will always be a bit nerdy and I’ve embraced it.
Over the years, the categories changed and the amounts increased, but I maintained a budget. After getting married and accepting my first real job, I no longer found the need to keep a strict budget. As long as the bills were paid, I didn’t mind not tracking every penny. That was all great, until I wanted to start paying off debt for our cars and home. Then I wanted to know where every penny went. Back to the spreadsheets and budgets I went.
As it turns out, if you don’t budget you don’t know where the money goes. I was spending way too much on incidentals in that one aisle of Aldi. You know the one with all of the stuff that isn’t on the list? That one kills me every time. Somehow the stuff just jumps into my cart. I swear I have no idea how it gets there. The budget put the kibosh on the extras aisle in Aldi and the clearance aisle in Walmart.
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Why Make a Budget for Beginners?
A budget isn’t just needed to help you pay off debt or live on a tight budget. A budget is needed no matter where you are financially. If you don’t budget then you won’t know where the money goes. It is best to set a budget now and allow it to grow with you and change as needed. Waiting until it becomes a financial necessity is not a great way to go.
How to Make a Budget for Beginners
- Find Your Annual Income
Let’s start with the good stuff. Figure out how much your take home pay is each year. I don’t bother including the money taken out for taxes and insurance because I don’t see that money show up in the bank anyways. If that’s not your situation, then go ahead and include your entire paycheck.
- List Out Your Expenses
Now comes the hard part. List out every bill and expense you have. I list these out by how they are billed. I create a section for annual, monthly, and varied costs. These categories just help me to remember all of our expenses.
- Find the Total Yearly Costs
Next you are going to figure out what you send in total each year. Multiply the monthly costs by 12 and the varied costs by whatever is needed to account for the entire year. Then add up all of the costs to find your total annual cost.
Now that you know what comes in and out, we can start on a budget.
- Analyze Spending Habits
If the total cost is more than the total income, you need to figure out what corners to cut in order to stay in the black.
5. Calculate Weekly Costs and Income
Divide the yearly costs into weekly costs by dividing by 52. Do the same for your income. Now you know what you spend and earn each week. Look through the weekly costs and decide if any areas need to be reeled back in. For example, if you notice you are way above the average in the clothing category, maybe it’s time to cut back on the shopping sprees.
6. Spend and Track
Lastly, decide on what your ideal weekly cost is for each expense. From here you will either divide cash up into envelopes or track your transactions. When things get out of whack, it’s time to reevaluate and get back on track.
Annual Averages for the Budget
Average Food Budgets
Family of 4 $16,000
Average Apparel Budget
Average Utility Budget
Average Transportation Budget
Average Healthcare Budget
Average Housing Budget
Average Insurance Budget