We all know the importance of a budget – it’s the Google maps to our financial independence. But how often to we think about making a budget and say “I’ll do it later“? Newsflash, it’s later.

Half the battle is coming up with the format and writing it all down on paper (so much easier to guess-timate in our heads – believe me, I know). I’ve taken that hurdle out of the way. Here is a step by step guide on how to efficiently, and effectively, get your budget down on paper (finally).

Step 1: Write down your goals & think about the following:

  • Do you have a $ of debt you’d like to pay off? If so, what’s the goal timeframe to get to $0 debt?
  • Are you saving up for something in particular (wedding, house, vacation, new car, etc.)?
  • Are you looking to pay down debt AND save? If so, what are the $ amounts for each?

Step 2: Determine your monthly income after taxes and retirement contributions (if you need help est. taxes click here)

Step 3: Calculate your monthly fixed and variable expenses

Step 4: Calculate your cash cushion (i.e. how much you have left over and the end of each month)

Step 5: Ask yourself the following questions:

  • Do you have enough $ left to meet your monthly, yearly etc. savings goals from Step 1?
  • Do you have enough $ left over to cover emergencies?

If you answered NO to either of these questions go back through your budget to figure out how to control the bleeding

1) Start with your variable costs, as these tend to be easier to control

  • Do you really need that new pair of shoes/jacket/tech toy, etc.? No, need and want are not the same thing.
  • Can you eat out less often or invite friends over to watch a movie on Netflix, Hulu etc. instead of going to the movies and handing over a gold nugget for popcorn and a drink?
  • How much is that morning latte really costing you each month?

2) Next look at your fixed costs

  • Are there any monthly / yearly memberships that you never use?
  • Can you try to get negotiate a better deal on your internet/cable package?
  • Can you find a less expensive place to buy groceries and/or purchase more store branded products? 

*DO NOT, I repeat, DO NOT try to cut back on your debt payments. These come with painfully high interest rates and the more money you can put towards these now the happier (and fuller) your wallet will be later – trust me!

3) Are there opportunities to increase your income? Can you add another income stream?

Step 6: Once you’ve found a budget that works for you – track your spending over the next month (Click here for easy ways to track your spending).

  • Did you stick to your budget? If so, give yourself a pat on the back. If not, don’t beat yourself up about it. Simply ask yourself where did you splurge? Is there somewhere else you can cut back?

Feel free to add in any categories I’ve missed and comment below with any questions or suggestions on how to optimize your budget. For the full, printable template – see below:

Budget Template

Your budget, just like your life, is constantly changing. Make sure you update your expenses as your income and savings goals change over time.


Cover image source: http://travelnoire.com/wp-content/uploads/2013/09/o-BUDGET-TRAVEL-facebook.jpg


4 thoughts on “Budget Guide: The Map to Your Financial Freedom”

  1. “Can you try to get negotiate a better deal on your internet/cable package?” I am all for this – a cordcutter myself, it has provided around $700 in savings in the past year.

    Also, great point on not cutting debt repayment. So crucial to ensure continued debt paydown as a priority!

    1. There are multiple opportunities to cut down on monthly payments: internet/cable, insurance, phone bills, etc. We often overlook these bills as being non-negotiable but you’d be surprised how often a call to customer service can save you a few $s.

      For me, it was actually cheaper to bundle internet and basic cable than it was to purchase just internet (go figure). I think they’re plan was to get me hooked on cable and pray for upsell opportunities. Instead I’ve utilized subscriptions like Netflix to catch up on all my favorite shows. Wayyy cheaper than expensive cable packages!

      Thanks for the comment!

  2. I think the hardest part is sitting down and creating a budget from scratch. It’s difficult to come to terms when you don’t know where every dollar is going and it might expose us for where we are really spending our money.

    Once you get over the hard part of starting one, it’s much easier moving forward since it’s like an unused muscle getting exercise 🙂

    1. I completely agree – mentally, sometimes it’s easier to not know where your $s are going than to sit down and face the financial decisions you’ve made.

      Luckily, once you’ve jumped over that hurdle, you can figure out where you’re spending and plug any leaks to get back on track. Often the biggest obstacle is being stuck in our ways.

      Thanks for the comment!

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