The first step that I took to gain financial stability was to make a budget. Well, I actually made about 500 different budgets. I’m a wee bit obsessed with making budgets now. I’m beginning to think that I should have been an accountant.
My main budgeting method is Mint.com. If you don’t use Mint then I highly recommend that you hop on that train. It’s completely free and you can upload all your banking data plus investments, car and house loans, and student loans. It’s a great way to keep track of your money and debt and also your overall net worth. I find that Mint is a helpful tool in determining where your money is going and ways to cut your budget.
Along with my Mint account, I also created about 100 different types of budgets through Excel. I tried out a bunch of different budgeting temples offered through Microsoft Excel, but none of them really met my needs. Thus, I created my own from scratch. From there, it involved into about a 10-sheet spreadsheet containing my yearly budget, monthly bills, student loan details, and three-year finance goals.
A few of my three-year financial goals include: purchasing and paying off a new car by 12/31/15, paying off my SallieMae student loans (currently about $9200) by 12/31/16, and a volunteer trip to Africa in November 2015. I’ve calculated the amount I need to transfer to each of my corresponding savings accounts each pay check in order to meet my goals by my deadline.
By creating my own budgeting spreadsheet I was able to add everything I needed into one spreadsheet that was easy for me to edit, read, and keep track of my income and expenses. I also color-code everything because, well, I’m a bit obsessed at the moment.
A lot of people get overwhelmed with budgeting. Hence, why so many people are in debt and/or spend money on useless or unneeded things. Here is how I went about creating my budgets:
- Determine your monthly take-home pay
- Determine your monthly “hard expenses,” i.e. rent, student loans, health insurance, etc. (basically anything that you must pay each month and the amount doesn’t usually change)
- Determine your monthly “soft expenses,” i.e. groceries, gas, gym memberships, coffee shops, etc. (soft expenses include items that have more fluid costs each month and ones that you could probably cut back on if needed)
- At this point, decided if you prefer software/website programs such as Mint, or if you would rather create your own budgets through Excel
- Subtract all your expenses from your monthly income
- Hopefully you have money left over! If you don’t, then you need to readjust your expenses. Start with your soft expenses first. Trust me, there are ways to cut back on things.
- Stash your extra money into a savings account. You should always pay yourself first! If you have goals, such as a vacation, open a second savings account to put money away for this expense.
- If you have a lot of debt, especially credit card debt, put extra money towards paying those debts off! You can probably cut back on going out to eat or going to the movies to put extra money towards those extra payments.
- Stay on budget throughout the month! And check back throughout the month to see how you’re doing.
Budgeting shouldn’t be hard. Yes, it may not be fun because for most people, it acts as a wake-up call for where your money is going. You work hard for your money so why put it down the drain on stupid purchases or wasteful spending!
~ Happy Training!