How to start a budget.

Welcome to budgeting 101, we’re glad you’re here. Creating a budget is one of the more important things you’ll ever do. Not only will it help you enjoy your money more, it can help you create a stable financial future for yourself. And, even though budgeting may SEEM hard, we’ll help you outline a plan to make getting started a breeze.

As a resource, we’ve laid out some great templates that we’ll reference as we go. You can select whichever you prefer - a spreadsheet template or a printable one. The spreadsheet has the added benefit of helping you track expenses as well:

Now, let’s get into 6 steps to creating a budget.

Steps to Creating a Budget:

1. Write down your goals
   
   Before you start crunching numbers, take a moment to ask yourself why you want to start a budget in the first place. Are you trying to pay off credit card debt? Maybe tackle a student loan? You probably already know, but getting a clear view of all the reasons could help you stay motivated down the road. It can also get you on the same page if you are doing the budget with someone else. If you both know the goals, then you’ll both be able to work together to keep the budget.
2. Assess your Income
   
   You’ll need to get an idea of how much money you’re making each month and write it down to see how much you have to spend. Here is an example of the income section from the printable budget template that we offered above:


If you have multiple sources of income, list them on the left side and put your monthly income from that source on the right. Then add it all up to get your total income for the month. This will give you an idea of how much you have available to spend as you set limits for expenses.

Speaking of expenses, let’s move on to the next step.

3. Analyze your expenses
   
   You’ll need to break your expenses down into categories so you know where your money is going each month and adjust accordingly. If it’s a fixed expense, like a subscription that doesn’t change each month, it will be easy to know how much you’re going to spend. If it’s not a fixed expense, such as eating out or gas for your car, you may need to look back and see what you’ve spent in the past. Keep in mind that the numbers you put here are more than just what you plan on spending. They are also limits you plan on holding yourself to.
   
   Here is how the expenses portion of the template looks (we included a few examples and removed some lines just to give you a basic idea):


Of course, at the end you add up all your planned expenses on the Total Expenses line.



After you’ve added up all of your expenses, we’ll need to do a simple equation:



If you get a positive number when you take income minus expenses, that means you have some money left over. While it’s up to you what to do with that leftover money, we recommend putting it into some sort of
savings account. But if you have some fun ideas on how to spend it, feel free. Just be sure to add it into your budget so it’s accounted for.

If the number is below zero, that means you are planning on spending more than you are making and need to lower expenses. To fix this, go back through and see where you can spend less until your expenses are the same as your income or lower.

If the number you get is zero, then congratulations, you’ve successfully balanced your spending with your income.

As you set limits for all of your expenses, here are some tips:

• Be realistic – Don’t say “I’m only going to spend $50 on groceries this month,” when you haven’t been able to make it without spending over $100. If it doesn’t take real life into consideration, it won’t work.
• Be detailed – but don’t go too crazy. For instance, you need to monitor how much you’re spending on groceries each month, not how much you’re spending on grated cheese. Be detailed enough to break things down into helpful categories such as housing, groceries, or gas, without making it impossible to track.
• Be conservative – Remember, the point is to be able to pay off debt, save money, and achieve your financial goals. You will likely need to take a step back on spending too much in certain categories. So, challenge yourself to spend less so you can have more elsewhere.


4. Pick your tools
   
   While it may be feasible to track your spending with receipts, a pad of paper, and a calculator, using some other tools may be helpful. You’ll want to pick something that works for you and makes things as convenient as possible. Some will require more work from you, while others can track without you having to enter much at all. You may even choose a tool that makes automatic deductions from your account to pay bills, so you stay on schedule. To help you out, here are some ideas:
• Get some envelopes – This may sound silly, but one tool that some people use very effectively is placing money in envelopes based on each category. This keeps you from spending too much. If the money’s gone from the envelope, then it can’t be spent.
• Use a spreadsheet – We included a template above for you to use which you can also access here. Simply enter your income, set your limits, and enter your expenses throughout the month, and the spreadsheet will help you analyze your spending so you can stay on track.
• Use a mobile banking app – You won’t always be at home where you can look at your budget on paper or on a computer. Having a mobile banking app allows you to check your spending on the go. Simply getting the mobile app offered by your bank to check transactions will help you make decisions while you are out and about, so you can stay within your budget.
• MySpending – Speaking of mobile apps, Southern Bank users have the option of using a free tool called MySpending. It tracks your spending and allows you to set notifications when you are getting close to a limit that you set in each category.
5. Start tracking
   
   When it comes down to it, you’ll need to track your income and expenses to make your budget work. This is where you use the tools you’ve chosen to follow where your money is going and make sure you aren’t going over in each category. The more often you enter your expenses the easier this will be. Maybe sitting down once a week is enough. Maybe you need to sit down every night and enter them. Either way, the only way to know if you are hitting your monthly budget is if you keep track of your spending.
6. Reassess
   
   Don’t be discouraged if you don’t hit your budget at first. Instead, look for the reasons why. Did you set an unrealistic goal in a certain category? Is the tool you chose not working well? Did you have any expenses that you weren’t originally aware of? There is a lot you aren’t going to know when first learning how to start a budget and there are all kinds of reasons for not hitting your budget, which is why you need to reassess each month until you’ve got it.

We believe in you, and we know that with a little time, you’ll be budgeting like a pro. Just follow these steps and stay motivated, we’ll be here cheering you on.