If you’re like me, budgeting brings up negative emotions and feelings that you shouldn’t spend money on the things you love. This is only one side of the budgeting story. Learning how to create a budget is easier than you think.
What if I told you your budget was the not-so-secret key to achieving your goals? Maintaining and sticking to a budget is the foundation of financial health, and many tools exist to help you become a budgeting rockstar.
You may have a negative relationship with your budget, but I’ll be the first to tell you that you can change that. It’s possible to figure out how to easily create a budget and do it all within as little as 20 minutes a month.
Why you need a budget
Fact: you need a budget.
A budget is merely a tool. Think of it as the GPS system for your goals, whether you want to save for the down payment on a home, fund a 529 plan for your kid’s college expenses, kick some debt to the curb, or save for an amazing vacation.
The good news is you can make your budget your own. You can change the name if the word budget makes you want to curl up in the corner. You can change the names for the categories. For example, change Income to Money In, and Expenses to Have To’s and Want To’s. The beauty of the budgeting process is when you make it your own and have some fun with it.
Without a budget, your money has no direction. You’ve undoubtedly experienced this. At the beginning of the month, you have every reason to believe you’ll be left with a certain amount left at the end of the month. Except then you don’t. And it happens month after month. This cycle can keep you borrowing from your savings or using your credit card to pay expenses. And you have amazing goals you want to achieve. But they stay dormant on your journal from day to day and never seem to go anywhere.
Time to break up with a lack of direction.
Check out these budget-related podcast episodes to help you ace your budget:
- How to Budget the Right Way
- Get a Life You Love on a Budget You Can Afford
- Crack the Code on How to Save and Invest on Any Budget
- Budgeting Sucks, No One Has a Plan, But You Can
- Budgeting When the Numbers Don’t Make Sense
What goes in a budget
Creating your budget is easy and you can maintain it all in as little as 20 minutes a month. I know for a fact because this is the process I use every single month and have taught thousands of people to do the same.
There are a few key pieces:
- A list of your income for the month that you know you will get or an idea of how much you will earn on commissions or your side hustle
- A list of your fixed (have to pay) expenses for the month. Think mortgage, rent, student loan, minimum credit card payments, groceries, car payment, life insurance, and so on.
- A list of your variable (want to pay ) expenses for the month. Think subscriptions, gym membership, entertainment, shopping, eating out, transportation, travel, extra credit card payments, and expenses that aren’t necessary, but you really want to have them.
How to make your budget work
A budget is only as good as the numbers you put in it, so think about following these steps to make your budget tell the truth each month.
First: Create your budget at the beginning of the month with a column that includes the income and expenses you think you will have for the month. This can be accomplished by copying and pasting from the month prior, and adding in any extra payments you think you might want or need to make.
Then: Create a second column on your budget at the end of the month that includes the income and expenses that you really did have. This is the truth bomb for your budget. There are lots of tools that we’ll discuss below, but one of the easiest ways to do this is by looking at your current bank statement and totaling up how much you spent in each category. If needed, you can add categories that you forgot about. I’ve got a handy free Signature Budget Worksheet that can help you out.
Budgeting tools and apps
There have never been so many great tools from mobile apps to software to downloadable templates to help you set up and manage your budget. Don’t just limit yourself to apps as well. Think about Post-It notes, journals, notes on your cell phone. Anything will work. Try a couple of different strategies to see what works best for you and will keep you motivated to stay up-to-date with your budget.
Here are some tools to get your budget up and running:
You Need A Budget
You Need A Budget offers software and a mobile app to help you get your budget and spending in shape. Its focus is on helping you give every dollar a job along with setting and achieving goals. Sign up for a free 34-day trial to see why I love You Need a Budget.
Clarity Money is a mobile app that packs a lot of punch. Their motto is to help you take control of your finances by giving you a full financial picture, helping you find unwanted subscriptions and delivering other money-saving knowledge in the palm of your hand.
Medean is a newer budgeting app that is all about helping you save money. Did you know in fact that the average American has less than $400 saved for an emergency? Medean helps you know where you stand financially and shows you ways you can save money each month. I’ve found that Medean makes budgeting each month super fast and really easy.
Budgeting for couples
Mastering the art of budgeting can be tricky as an individual, let alone as a couple. Money issues with couples are one of the top reasons for divorce year after year. As a couple, you bring to the relationship your own values and habits around money. Hence why so many couples fight about money. That’s why you need to cultivate open communication channels so you can talk about your goals, problems, and create a system that works for you both.
Money rules – it’s a great idea to put a few money rules in place. The rules can serve as a foundation for how you make decisions as a couple for example, who is the primary person in charge of money decisions day-to-day, how much can you each spend without talking to each other, what will your bank and savings account structure looks like, how much will you each invest from your paychecks, etc. Setting the foundation will take the mystery out of money decisions as a couple.
Money dates – I’m a big fan of weekly money dates. They have been a life-saver in our relationship. A money date is just like it sounds, only better. Set aside fifteen to thirty minutes each week (preferably at the same time each week) to talk about what’s going on with your money. Make your money date enjoyable; have a glass of wine, go to your favorite park, make a nice dinner. During your money date, talk about what’s on your mind. What happened last week to your finances and what’s coming up in the next week. This is your time to reset and get focused on what’s happening behind the scenes with your finances. But please, have fun with these.
Set goals – Setting goals is a crucial piece of success with couples. You can set money goals in your money dates, or set aside a separate time during the month to write these out. Include short term goals like paying off debt or covering financial risks and longer-term goals like saving to buy a house and retirement planning. Goals can and should be flexible, and always incorporated into your budget so you can achieve them.
You can budget in 20 minutes a month
You can easily create and budget in 20 minutes a month. Whether you use an app, an Excel spreadsheet, my Signature Budget Worksheet, or software, you can become a budgeting champ in no time.
Here’s how we make it work in my household:
Beginning of the month:
- Take 5 minutes and complete the “What I think I’m going to spend” section based on last month’s numbers.
- Set 2-3 goals you want to achieve this month. Write down what the goal is, how much it will cost, when you want to complete it by and any other notes.
- Use an app to track your spending throughout the month. I also pre-pay my credit card a certain amount each week. That allows me to bank some credit card points, treat it like a debit card and pay it off in full each month, and easily see where I’m spending my money.
- Make sure you have weekly money dates with your partner or on your own to stay on top of your cash.
End of the month:
- Fill out the “What I spent category” and list all your expenses and actual income.
- Compare and contrast the two columns to see where there are any irregularities. For example, did you budget enough for eating out or Uber trips?
- Give every left-over cent a job. Sent it to pay off some debt, put it in savings or towards a goal, or put it towards next month’s budget.
- Rinse and repeat next month.
See how easy it is! If I can do it, you can do it. Let this be the year you create real change with your finances and start hitting all your goals out of the park!
Disclaimer: This post includes affiliate links, and I will earn a commission if you purchase through these links. Please note that I’ve linked to these products purely because I recommend them and they are from companies I trust. There is no additional cost to you.
Shannah Compton Game is a podcast host and CERTIFIED FINANCIAL PLANNER of the top-rated Millennial Money podcast. Millennial Money has over 6-million downloads in 164 countries. Shannah’s years of experience as a skilled Certified Financial Planner have set her on a mission to revolutionize how people think, act, and feel about their finances…and have some fun doing so.