Throughout this summer we have been working together to track our spending, align our spending with our values and now create a budget. If you missed the first segment or the second segment of the Summer Budget Challenge definitely check those out. This week, I will show you how to create your budget for the next year.
1. Choose your system: You can choose to create and track your budget using a variety of different tools. You might want to use the one that you used to track your spending, or switch to another one.
- Worksheet: Some people still enjoy putting pen to paper, if that is you check out this worksheet.
- Spreadsheet: Excel offers a variety of different worksheets. This site features a few good templates that you can use with Excel or Google Docs.
- Envelope System: Create your budget then take out cash for all of your expenses and put cash in specific envelopes. You can only spend what is in the envelope. For more information check out this link.
- Budgeting Software: There are a variety of different programs out there; one of the most popular is Quicken.
- Online Site: Again, there are a variety of sites. I use Mint.com because it syncs with my bank account, categorizes my transactions and tracks my budgets all in one place.
2. Create your budget: Over the past few weeks you have tracked your spending and aligned your spending with your values. You will want to use this information to help you create your budget categories as well as decide on how much money to allot to each category. Here are some questions to ask yourself as you begin outlining your budget:
- Prepare for the Unexpected: Do you have an emergency fund to draw on if you lose your job or incur unexpected expenses (car repairs, medical bills, etc.)?
- Plan for the Future: Do you have a savings account that you regularly contribute to? Even a small amount (such as $25) every month can add up. Are you investing in your retirement? Are you saving up for a large purchase (computer, car, house, etc.)? If you have student loans, could you pay off the interest now?
- Save for Occasional Expenses: Do you have a way to pay for occasional expenses? Make sure that you take into account how you will pay for Christmas and Birthday gifts, travel for the holidays and other occasional expenses so that these expenses don’t break the bank.
- Problem Areas: As you tracked your spending did you find any problem areas? If so, gently challenge yourself to be more frugal in those areas. Remember to start out slow, it takes a long time to change a bad habit.
- Have Fun: Where is your discretionary spending? Many people when they are first budgeting forget to give themselves some room to have fun. While it is important to be frugal and align your spending with your values, it is important to have some space in your budget for the fun stuff.
- Be Flexible: It can be difficult to precisely predict your spending, especially if this is your first budget, so be flexible. If you have to switch some things around to better fit you, that’s fine!
Join the Conversation: What are your budgeting tips?