Creating a Budget

Podcast Transcription:

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Hey Money Talk listeners, I’m your host, Maddy and for this episode, I’m going to go back to the basics and that’s budgeting. What comes to mind when you hear the word budget? Do you think financial freedom, less debt, accomplishing goals or do you think restricting, stressful or time consuming? Budgets don’t have to be stressful or restrictive. Creating a budget gives you a plan for your money- where you spend it and how much you are able to save. Creating a budget can help you reach all of those goals you have whether that’s retiring 20 years from now, saving for a down payment on a home or going on vacation next summer. In this episode I’m going to share the simple steps to creating a budget so you can get started. And remember you can easily do this with pen and paper- that’s how we do it at our house, you can do it on your computer, maybe in a spreadsheet or there’s a lot of awesome free apps for your phone out there that you can take advantage of. Here are my super simple steps to creating a budget.

First is to determine your net income. So this would be anything from your regular paycheck coming in from a full-time or part-time job, any income you have coming from a business that own or maybe you have an Etsy shop or maybe you sell something that you make on the side, any income from that. If you have any child support or social security coming in, you want to account for all of that.

Then it’s time to list out all of your expenses. So you have fixed expenses that do not change every month. So these would be things like rent, mortgage, your car payment, child care, internet service, things like that. And then you have your variable expenses so these change every month. These would be things like groceries, gas, entertainment and eating out. And you also want to make sure you’re including any debt payments AND any money you’re putting into savings. You might need to track your expenses for a few months to see where you stand, especially for those variable expenses. So you’ll probably need to look at the last few months of receipts, statements and bills to do this.

Once you have your total your income and your total expenses you can subtract your expenses from your income. If you’re making more than your spending, that’s a good thing. The extra money you have means you have some flexibility if you want to put more away for savings or any debt repayment. Or maybe that extra money means that you can eat out a little bit more during the month or put that money towards any hobbies that you enjoy.

If you’re expenses are higher than your income so you’re spending more than you’re making that’s when it’s really time to adjust. Usually variable expenses are where you want to look first such as eating out less, working out at home instead of paying for a gym membership or taking advantage of grocery store coupons. Really the goal is to have your income and expenses come out to zero. That means you’re making your money work for you and you’ve given every dollar you have a name, whether it’s going towards an expense or a savings goal.

Now that you have your budget laid out, remember that it is flexible and it can be adjusted when needed. Keep an eye on your spending and if you need to move money from one category to another, you can make that adjustment. Or if you have a month or two with a lot of birthdays or a holiday, you can plan ahead for that extra expense without spending more than you’re making. Don’t forget to make any changes necessary and revisit your budget on a regular basis. It’s not going to do you any good if your budget wasn’t adjusted for that raise you just got, the new home you bought or the puppy you added to your family.

That’s it! Those are my super simple steps to creating a budget. That’s actually kind of fun to say, super simple steps! Alright everyone, thanks for listening!

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