Imagine this: it’s the end of the month and you have $300 in your account and rent is due in three days. That scenario would be fine if your rent was only $200, but it’s 2024, and that’s not very realistic. You work hard but it always seems like you’re living paycheck to paycheck. You never feel like you have enough money at the end of the month when bills pile up. Sound familiar? I felt this way month after month and never understood why I wasn’t seeing the money add up. How naive of me – we were spending too much and were not allocating our income appropriately.

Fast forward a couple of months and we decided it was time to get our finances in order. My husband and I sat down and created the budget. I’m here to help you make sense of your own budget so you can also feel freedom from living paycheck to paycheck.

Determine Your Income
This might seem like a silly concept but do you really know how much money you bring home after taxes? If you do, then you’re already one step ahead. Take time to evaluate two to three previous pay stubs so you can estimate your monthly income. If you are salaried, then this task should be easy. If you have a varied income, then it may take more time to determine how much you will make each month.

Anticipate Your Expenses
When you are writing down your monthly expenses, you want to initially write down everything you might need. Start with your essentials (rent, loans, groceries, etc.) and then go through spending that may not be so necessary (restaurants, shopping trips, etc.). You can create a budget using something as simple as a notebook or an Excel spreadsheet. Or there are many apps, like Mint and Every Dollar that can make the process a little more automatic. Find what works best for you so you are able to succeed. If the tool you are using causes frustration or is too tedious, then you’ll never want to continue. Each person will work best with something different so the importance of this step is to find your best fit.

When you’re putting together your budget, there are many categories that you will want to consider. Some will be more obvious than others, which is why I recommend using an app because they can present categories you may not think of. A common rule of thumb is to budget based on the 50/30/20 method. 50% of your income toward needs, 30% toward wants, and 20% toward saving and investments.

This process may involve a little guess and check work when it comes to adding unnecessary spending items. For example, start with what you think you might be able to spend at restaurants and adjust if the amount puts too much pressure on your budget.

Track Your Spending
This is the most crucial step in the whole budget process. Not paying attention to what money is going out is the quickest way to overspend and diverge from your budget plans. Using Excel or one of the many budgeting apps available will likely be the easiest way to automate this process. With Excel and the free version of some apps, you will have to manually add your expenses. This process works well for us because we’re forced to pay attention to the balances in each category. Otherwise, Mint offers a service to connect your bank accounts at no cost and they will automatically track your spending based on the activity from these accounts. I personally prefer having to manually add our spending because I find we spend less money this way. No matter what method works best for you, I cannot emphasize enough the importance of tracking! Without tracking, you may end up spending more money than you realize.

Work the Budget
Make a plan for the month and pay attention to when certain items need to be paid. For example, if you wanted to save $500 per month, you might need to spread that out and save $100 – $200 per week instead of all at once. When you have a large bill coming up, like rent, you may save less that week and more during a week when there aren’t as many bills.

Your budget is all about planning ahead and creating a balance. In our family, we have decided we can afford to eat out once a week. When we didn’t follow a budget, we found that we were eating out a lot more than we could afford. Thus, we were forced into living paycheck to paycheck. By following a budget, we’ve realized that our spending habits were what made us feel like we couldn’t keep up with bills.

When you work your budget, your budget will work for you! A budget requires discipline. If you have financial goals, then you’ll be able to achieve them by following your plan.

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