How to Create a Budget – With Budget Expense Worksheet

R2R-How to Create a Budget

It is time to apply your priorities to spending goals, so the money you spend truly aligns with your values. A budget can help you reach your financial goals, whatever those may be!

Focus on the Goal

Budgeting for the sake of just budgeting is neither fun nor effective. While a pre-portioned budget can be helpful for some, it is important to design your spending goals around your unique values and priorities. Visualize the end goal to motivate yourself and focus your spending. You will want to set up short-term goals like a family vacation later this year and long-term goals like saving for retirement. Setting goals helps trigger new behaviors and keeps you motivated to turn your vision into reality.

Get Organized

Download our resource: Budget Expense Worksheet

Putting together a budget doesn’t have to be overly complicated or intricate. Start with your bank statement. Identify your monthly income and regular expenses. Next, grab your credit card statements to assemble your different spending categories. Your bank might already do this for you. Those could include your monthly mortgage, car payments, groceries, insurance, childcare, entertainment, utilities, etc. Set each of these expenses into two buckets: essential expenses and non-essential expenses. Essential expenses are not going to stop no matter what life throws at you, such as your mortgage, groceries, or a car payment. The non-essentials are expenses that you can cut back on, such as entertainment, dining out or travel. 

Compare your monthly income to your monthly expenses. Do you have extra money each month to save or are you going into debt? Now that you have completed this important step, you have a basic, organized outline of a budget to move forward. Just like a cluttered desk at your home office workspace makes it difficult to find your pen when you need to write, in a household without a budget, it can be challenging to locate your money.

“Too many people spend money they haven’t earned, to buy things they don’t want, to impress people that they don’t like.”

Will Rogers

Reevaluate your Expenses

Now that everything is tabulated, you can start making decisions on your unique priorities. Allocate your spending toward the things that you consider most important. First, look for areas where you feel cutting back would be appropriate and not painful. Move on to other expenses that you can trim. Everything is a tradeoff. A Dollar spent in one category is a Dollar taken away from another possibly more important goal.

Download our resource: Budget Expense Worksheet

Proper Perspective

You want to keep the timeline of your budget short-term to keep the goals within your reach but use a long-term perspective for your savings goals. Having short-term budget goals can be an impetus for you to stay on track because the reward “is just around the corner.” Adding a reward, a dinner out, a trip to the beach or pizza night, can provide extra motivation to stay on your budget path. It can be easy to slide back into bad spending habits if not properly focused.

Saving for Big Goals

One of the top budget priorities could be allocating money toward your retirement savings. This is a long-term goal that requires annual contributions to build up over time. For those already enjoying retirement, now might be the time to take that big vacation you have always dreamed of; being able to explore new places or relax at the beach under a palm tree sounds extremely inviting. Another goal might be contributing to education savings for children or grandchildren.

Treat Savings Like a Bill

One way to make sure you pay yourself first is to treat the allocation to your savings bucket the same as you would any other bill, it has to be paid on a monthly basis. This is a reverse budgeting strategy where you build your spending around a savings goal, such as retirement or saving for a child or grandchild’s education. This can help you focus on the big picture when tempted by impulse buying. Maximum contributions to your retirement accounts such as 401k and IRA, should be the top line of your reverse budget. Set this on autopilot by having the money automatically withheld from your paycheck or transferred from your checking account to your savings or retirement or education savings accounts on a monthly basis. Saving often and consistently is a key habit to successful wealth building.

Set Money Goals as a Family

Having a daily money goal is a wonderful way to introduce your children to the importance of saving. Teaching them the value of budgeting now while they are still living at home will benefit them down the road. Including everyone in the family in the budgeting process to get buy-in across the board can make achieving the results you desire easier. Big Picture: Get your kids to focus on the outcome rather than immediate gratification. Maybe you want to plan a family vacation together to get the children enthusiastic about saving for something. Obviously, you don’t have to include the kids in every aspect of your financial picture, only the ones you are comfortable sharing. 

“The second vice is lying. The first is running in debt.”

Benjamin Franklin

Control your debt – One of the worst things you can do financially is run up a bunch of high-interest credit card debt. You are then essentially paying more for the goods and services you bought because of the interest charges that are being added monthly to the initial purchase price. Some debt, like a home mortgage, can assist in building wealth over time. Student loans can be a necessary evil to further one’s education. Understand the payback criteria, as they can vary depending on the type of loan (student vs parent load). Credit card debt, with its exorbitant interest charges, is stealing money from your present and future savings.

Use the Right Tools

There are lots of tools to assist in budgeting, for some people, that might mean making an Excel spreadsheet (or using the template we have created!). Others find that using an app on their phone is the best way to go. Paper and pencil can get the job done too. Once you get your budget rolling, it will be like getting a raise at work. You will find money that you didn’t know you were spending and you can redirect toward your goals.

Take the time now to reflect on your budgeting and spending priorities. Use this opportunity to refocus on what is most important to you with regard to how you will use your money to achieve your goals. Creating a budget doesn’t have to be a stressful or mundane task. In fact, by following just a couple of the simple steps we have discussed, you can be successful in budgeting your money and also have a little fun along the way! Do start now to bring more enjoyment into your life by working toward your short-term goals, while you also pursue the goals that will make your long-term financial future successful.

Download our resource: Budget Expense Worksheet

More Roads to Retirement

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Fuel your retirement
Plan your route
Avoid potholes
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For those riding in the backseat
Seeing the road ahead
Finding the right exit
You've arrived at your destination
Mapping the historic route
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