Budgets. They can really suck, right? They feel restrictive, pointless and they never work, right? WRONG. I’ll show you why in this post, and teach you how to budget your money in the best budget guide for people who hate budgets…aka you.
For some people managing money comes naturally. But for most (like me before budgeting), we get paid on Friday and seven days later we’re left wondering where our money went and anxiously await the next payday. Does this sound like you? Be honest.
For yearsssss I felt like I was working so much but never seemed to have any money. One day something clicked and I decided to take control of my finances by creating a simple, effective, realistic budget and STICKING to it. I’ve been living debt free for years and have:
- Paid for my wedding when I was only 24 years old in cash
- Fully paid for my university education without any help from my parents
- Saved for a downpayment and bought a property
- Been on several long term backpacking trips (more than 4 weeks) and most recently saved over $30K in 8 months to travel the world with my hubs.
Learning how to budget your money is the key to keeping more of your money instead of mindlessly spending it. There are tons of things we buy that we really don’t need and creating a budget will help you see exactly what you’re spending on and how you can save instead. Remember: Money Saved is Money Earned.
- Stop wasting money on these everyday items
- 13 EASY ways to save over $300/month
- How we saved over $30,000 in 8 months to TRAVEL
What is a budget?
A budget is, “an estimate of income and expenditure for a set period of time.”
or in normal language:
How much money you make and how much money you spend in a certain amount of time. The difference of which is how much you SAVE.
Since saving is only possible when you spend LESS than you make, a budget will help you pinpoint exactly how you can spend less. Using the information from your budget, you’ll be able to create actionable plans to achieve your savings goals.
A lot of people feel overwhelmed by debt and feel restricted by budgets. Take a deep breath, because you can do this. You can get out of debt and start saving more money than you thought possible!
Creating a budget is easier than it seems but takes a little work to get started. In the simplest terms, you create a budget by:
- Write down your total after-tax income for the month.
- Write down everything you spend on in one month – including fixed bills like rent and variables like going out to eat.
After creating your budget, use that information to analyze how you can save money by:
- Finding ways to decrease your spending.
- Finding ways to increase your income.
Then you’ll keep more of your money. That’s it.
Remember: Every dollar counts.
Let’s get to the nitty-gritty and make that budget. This is a long, detailed post so don’t forget to PIN for later!
How to budget your money – the Best Budget Guide:
1. Start with your “WHY.”
The secret to sticking with your budget is to know why you’re doing it. Knowing your “why” will help you stay strong when you want to give up, say eff this budget crap and buy whatever you want. It will help you stay focused on your goal and keep you motivated to stick with your budget. So why do you want to start using a budget?
Do you want to:
- Get out of debt?
- Save for an expensive item?
- Pay for your wedding?
- Prepare for a new baby?
- Save for a down payment?
What is the reason you need to create a budget and save more? What is your why?
Once you know your “why”, read on to learn how to make your budget.
2. Write down your monthly income.
If you have a steady income this is really easy, add it up and write it down. For our example, let’s say your monthly income is $3000.
If you have multiple jobs and an unsteady income, use the least amount of income that you’re guaranteed to make.
For example, if you make between $1000-$1500 washing cars, then use $1000 as your number. This way you’ll automatically budget for more income, not less.
For some ideas on how to make extra money check out:
- 9 ways to make money online for FREE
- How to start a blog
- How I make $1000/month working 2 Hours a Day
3. Write down all of your monthly FIXED bills
Include everything like: Rent, Mortgage, Internet, Phone bill, Utilities, property taxes, Personal insurance, Transportation (car payments, car insurance, gas, bus pass etc.), debt repayments etc.
4. Go through your past 3 credit card statements and Categorize your Spending
Create another column named Variable Expenses. Get your last 3 credit card statements and create categories for each area you spent in.
Categories could include: Eating out in restaurants, after work drinks, beauty (hair, nails, waxing), pet supplies, travel, clothes, coffee, liquor store purchases, groceries, gifts, home supplies (shampoo, toothpaste, dish detergent) etc.
This exercise will be an eye-opener. Many people have no idea that they spend over $60 a month or more on coffee! The more specific your categories are, the easier it will be to identify exactly how/where to cut your spending.
Get the average amount spent for each category by dividing the total by 3 (because we did 3 months of expenses)
Now you can see where you’re spending your money, and why you haven’t been saving anything despite working so hard. Next is the fun part!
5. Analyze the budget sheet and find ways to save.
Now that you can clearly see where your money is going, it’s time to cut things out and find ways to reduce spending. What did you spend on that you didn’t really need to buy? Let’s dig in to how to budget your money and reduce costs in each category.
Related: 13 Easy Ways to Save over $300/month
Take a look at your biggest expenses, in this example they are – Rent, Groceries, transportation, eating out and shopping. Dig deep and think of ways you can reduce them. Almost all of the items in your variable expenses column are unnecessary purchases. You’ll immediately start seeing savings by reducing/eliminating spending on items in this category.
Ways to Reduce Costs:
- If you live in an expensive neighborhood, you could consider moving a little further where you’ll pay less rent
- Move into a place with roommates to share the cost
- If you have an extra room, use Airbnb to rent it out
- Move into a basement apartment that has everything included
- Move in with your family to save on high rent
Transportation: By giving up your car, you’ll save on gas, insurance, car maintenance AND you’ll earn money by selling it. It may not be as convenient, but the savings will be worth it.
- Use public transportation
- Sell your car
- Ride your bike
Variable Expenses: You’ll find that this is the easiest category to find ways to save
- Dining out – limit to once a week
- Alcohol – skip it and drink water instead
- Use refillable water bottles instead of buying disposable
- Substitute brand name items for non-brand name items – Same same, cost less though.
- Use Ebates to purchase your household items online using Amazon or any of the hundreds of sites they have – Sign up with my code and receive your first $10 bonus for FREE!
- Meal prep and take your lunch to work – Use $5 Meal Plan to take all the thinking out of what to eat!
- Cancel any memberships that you’re not using – Gym, Costco, Amazon Prime etc.
- Cancel Cable and use a streaming service like Netflix or Hulu – you could even split the cost of these services with your friends/family OR Save even more by only using YouTube for $0.
- Stop buying clothes and shop only at thrift stores
- Hair/Nails/Waxing – Do it yourself or use Groupons to save. Anything that they can do for you at a salon, you can do for yourself at home – including hair cuts. However, I wouldn’t cut my own hair, but I always use Groupons to score amazing salon deals. If you’ve never used Groupon before, sign up today using this link.
- Stop buying coffee, prepare it and bring it from home
- Buy second hand instead of new – for everything.
- Make DIY Gifts – bake cookies, make a photo album, create a scrapbook, knit a scarf etc.
- Reuse, refurbish or DIY as much as possible
6. Create a Grocery Budget
Analyze your grocery spending by looking what you’ve been buying, what you’ve been letting expire, what you’ve bought and barely use. We all have that lettuce that we continually buy in hopes that we’ll make a salad and every week it goes bad and we throw it away lol. Stop doing that. groceries. You should aim to reduce your grocery spending by 10%-20%. If you’ve never tried to limit your grocery spending, start small and then adjust the budget to an amount that is realistic and achievable. The worst thing you can do is budget for one hundred dollars a week, end up spending three hundred a week and then give up.
Tips to save on Groceries:
- Start Meal Planning. Prepare delicious food with no thinking using $5 Dollar Meal Plan. You’ll receive a meal plan and shopping list every single week for just $5 a month. You’ll even get a full 14-day trial to see if you like it first! For me (someone who hates wasting money), this $5/month spend is worth it because it takes the thinking out of what to eat/cook and helps me stick to my budget much easier. It’s saved me hours of looking for recipes, compiling grocery lists and the stress of not knowing what to eat. If you don’t have the spare cash for it right now, you can check out Pinterest for tons of meal plan ideas.
- Use Ibotta to get money back on your grocery purchases
- Make substitutions – instead of the brand name items, go for the non-brand name items. They’re usually almost identical products.
- Stop wasting money on extras like cookies, ice cream, and juice. Those are indulgences, expensive and a bonus is that you’ll be healthier without them.
- Eat less – we generally eat way more than we need to. You can try intermittent fasting by skipping breakfast and only eating lunch and dinner. You’ll lose weight, get healthier and save money.
- Stop buying individually wrapped items or prepared foods. You will always pay a premium for these. Buy it and prepare it yourself.
- Buy frozen fruits instead of fresh to use in smoothies etc.
7. Implement Behaviour Changes to START SAVING
Once you’ve decided how you will change your behavior to start saving money – DO IT! It may feel hard at first because it will be an adjustment, but keep with it and you’ll see the money start building up. Take a look at the chart below on how we reduced spending to increase savings.
You can go from saving only $30 to over $1000 a month just by examining your spending, making substitutions, and changing spending behaviors. What changes can you make today? It takes a bit of sacrifice, a mindset shift and adjustment but the freedom of being debt free and having savings will be SO worth it. And there you have it!
Take the time and start today.
For some ideas on how to make extra money check out:
Did this post help you? Do you have any other tips or questions? Let me know in the comments below or at [email protected]
FTC Disclosure: I may receive a commission for purchases made through links in this post. I only recommend products/services that I personally use and/or believe will add value to readers :) Love ya! Read my full disclosure.