How To: Make a Budget
1. Evaluate income and expenses
2. Set a goal that corresponds to your financial situation
3. Set up a system for charting progress
4. Take initial action to start working towards the goal
I’m not going to lie: I’m in debt. For the past several years, life was chaotic, and I was living paycheck to paycheck. I didn’t make a budget because there was no consistency in my life, and the idea of looking at my finances stressed me out. I should have made a budget anyways, since I was already stressed out.
Earlier today, I evaluated my income and expenses, and found that 50% of my income was going to essential things like rent, car and educational expenses, and such. About 15% was going towards non-essentials- mostly subscriptions and eating out at places. I have a good bit of debt to pay off though, and am spending about 30% of my income on that. I wasn’t saving much, which I see as a problem.
So, I set a goal of continuing to spend 30% of my income on debt reduction, with 10% going into saving while only spending 5% on non-essentials. If I can find an additional way to bring in cash this year, that would be great, too.
I put all of this into a spreadsheet where I can evaluate each month’s expenses against my goals. Once it became less about money and more about math, it actually felt good, like a challenge. I love challenges.
Lastly, I paid a couple bills as well as a debt I’d been putting off. It felt great to know that, thanks to my budget, I could afford it.