I’ve been referring to myself as an adult ever since I moved away from home and started college. In a way, I’ve been lying to myself: I don’t think true adulthood really starts until you have significant income and, in turn, significant expenses.
I’ve always been one for setting long-term goals, and that applies to my financial life as well. When I started my job, I knew I wanted to have a better handle on my spending and saving habits. After a month, I felt like I had enough information to start on that track. So earlier this month, I dug into Excel and began to budget.
If you have regular income and regular expenses, regardless of the actual amounts of either, you should make a budget.
The typical answer to the “why” in this case is along the lines of, “It’ll help you stay organized and on track of your money.”
Let me put that into context for you.
Imagine you walk into the grocery store. You suspect you spend a lot more than you should on groceries, but you don’t have a way to check. Sure, you won’t buy some pricey, exotic fruit or anything like that, but what about small things. An extra bag of chips? One more package of off-season blueberries? They couldn’t impact the bill too much, right?
Now, imagine you tracked your grocery spending. At the start of a month, you set a maximum for what you wanted to spend—and you know exactly how much you have left. Will that extra splurge item put you over the edge? If so, put it back. If not, splurge as needed.
That’s the beauty of having a well-organized budget: absolute clarity when it comes to purchasing decisions. Why wouldn’t you want that?
How Do You Make One?
If you haven’t made a budget yet because you don’t know how, fear no more! There are lots of easy, easy ways to do it—including this budgeting worksheet from SALT™.
Ultimately, you want a method that fits your life, so here are the 10 steps that worked for me:
1. Open a new spreadsheet. Title it “Your Name’s” Budget. Title the spreadsheet’s first tab something similar.
2. Create your labels. In the rows of the first column, write the words “Income,” “Fixed Expenses,” “Variable Expenses,” and “Income—Total Expenses.” Bold them, and leave some space between each category.
3. List your income. Underneath “Income,” list how much money you make a month. Use post-tax income, as that’s how much actually goes in your pocket.
4. Fill in your expenses. If you can’t change an expense (e.g., rent, car insurance), place it and its amount under “fixed.” Things you can alter, like groceries and toiletries, go under “variable.” For these expenses, set amounts for how much you’d like to spend on each a month.
5. Add your expenses. Use the “sum” formula to add the fixed and variable expenses, separately then together. Subtract this total from your income. That remainder (hopefully positive) is how much money you have left over at the end of the month. Put it next to “Income—Expenses.”
6. Start saving. Bonus points: Create a section called “savings” and list how much you’d like to save every month. Subtract that from your “Income—Expenses.”
7. Create a new month. Name the next spreadsheet tab after the calendar month you want to track (e.g., “Feb 2014.”).
8. Copy your expense information into the new tab. Build out some rows between each type of expense.
9. Make a new column next to the expenses. Title it “actual spend.”
10. Start budgeting! In this column, track all the transactions you make in each category. Sum the numbers so you can see how close you are to your limit, and adjust your spending as needed to hit your targets.
That’s it! It’s too early to tell how my budget for this month will turn out (check back for updates), but I know I’m on my way to money-savvy spending.
What’s your system for budgeting? Let us know in the comments.