Create a Monthly Budget

Do you live by your monthly budget? If not, this one is for you. If you have financial obligations and goals (so I'm pretty much talking to everyone here), you need a monthly budget. Grab a piece of paper and let's get to it.


Yes, you could use a budgeting app to do this. However, if you do not currently have a monthly budget, I highly recommend getting out a piece of paper and writing everything down. If you are anything like me, you did much better on tests when you wrote out your notes instead of reviewing the PowerPoints provided by your teacher. Once you become familiar with your income and expenses, you can start plugging them into an app every month.

First, you'll need to know what you are working with. Begin by writing down your income after taxes and your expenses for each month. If your income varies from month to month, take a look at the past 6 months and use the average.


Identify Expenses

Fixed Expenses
Your fixed expenses are items you must spend money on each month.
Rent, Mortgage, Utilities, Car Payments
Contributions to your emergency fund and retirement accounts
Bills that are not monthly but occur quarterly or so
Groceries

Variable Expenses
Your variable expenses are all the extra ways you spend money that are not necessary. These amounts usually change each month.
Food and drinks out - this includes Starbucks and Dunkin' Donuts
Clothes
Subscriptions
Entertainment 

Assessment

Income - Fixed + Variable Expenses = leftover money!

If you have money available after you pay both your fixed and variable expenses, you are doing better than the average person. I always create a zero-based budget where even the "leftover" money gets a home. If you have leftover money after creating your budget, assign this money to a category. If you have debt, I recommend putting it towards that. If you do not have debt, create other goals for yourself and assign this money to that category.

Create Goals

What are your short-term and long-term goals?

Do you have any student loan or credit card debt? Your first goal should be to become debt-free. Pay off your debt quickly so you can use the money you make in other areas of your life. It is never too early to start saving and planning for big purchases you will make in the future. If you are planning to purchase a car or a house within the next few years, fill up that fund with this leftover money.

Evaluation

Look at the budget you have created and see if you can make any improvements. Can you cut back on your variable expenses in order to meet the goals you established?

If you normally spend $15 a week on Starbucks, make a goal to only spend $6 a week instead. You'll save $36 a month with this small change.

Do you currently have any monthly subscriptions you can cancel? Do you really need both Netflix and Hulu? What about those ipsy, stitchfix, and popsugar monthly boxes? Can you choose between spotify and apple music? We don't always realize how much we are spending on these subscriptions per month since they are automatically drafted out of our accounts every month.


Review

Okay, you have a budget. Yay! Now, you need to remember to review and update your budget at the beginning of each month. You will become familiar with your numbers and be able to tweak the categories as needed to meet your goals. Everyone has different goals and events going on throughout the year that will change the dollar amounts you set aside for certain categories. Once you have your budget in place, I recommend you create a dream board with inspirational pictures and words related to your goals. This is a visual reminder that will encourage you to STICK TO IT! You'll never reach your goals and be financially successful if you aren't sticking to and always improving the budget you create.


Happy budgeting, friends!