Let’s face it money makes the world go round and in this current climate, it is more important than ever to know how to effectively manage your finances. For many people creating a budget is not  as simple as it sounds. So, here are three steps you can follow to create a simple yet effective monthly budget!

3 Steps to Creating a Budget

1. Calculate your income from all sources
2. Create a list of monthly expenses
3. Total your monthly income and expenses

1. Calculate your income from all sources

Calculate your income from all sources. This includes your paycheck, income from a side hustle, alimony or any other funds you receive on a monthly basis.

2. Create a list of monthly expenses

Write down all of the expenss you expect to have during the month such as your car payments, groceries, mortgage/rent, etc. Make sure to differentiate between fixed and variable expenses.

Fixed expense are expenses that are consistent from month to month i.e., rent or mortgage and car payments. Variable expenses are expenses that will change from month to month so you will have to estimate these expense based on past spending habits i.e., groceries, and certain utility payments.

3. Total your monthly income and expenses

Next, you will need to total your monthly income and expenses. If your total income is more than your total expense, then you are in good shape. On the other hand, if your expenses or more than your income, then you are overspending. Based on the outcome of your budget you will have to adjust your spending habits accordingly. 

So, here is a Bonus Tip for managing your expenses. Take your bank statements from the last three months and go through and highlight any unnecessary spending that you make have – amazon shopping sprees, old gym memberships, regular take out meals. This gives you a good idea of what you can cut back on to possibly get your budget out of the red!

Budgeting can be simple but sticking to one is what gets tricky for a lot of people. Being an accountant, I love excel spreadsheets, so I use a very simple non flashy spreadsheet to budget my monthly finances. If you are not keen on excel spreadsheets, there are several great apps that can work the same way if not better! Mint is a great app that will link to your bank accounts and do most of the leg work for you. Like I said, there are several other apps out there, but mint is free 99, so I think it is a great alternative to excel!

If you want to go the excel route for your budgeting needs, see the Books N Budgets Budget Template to help you create a simple and effective budget.

Need additional assistance with getting your personal finances in order? Book a FREE Consultation below and lets get you on track for 2021!