complete their first budget.
In a budget, you track 3 basic things: money entering your accounts, money leaving your accounts, and your financial goals.
Income can include your regular paycheck, side hobbies that bring in money, investments, scholarships, gifts - anything that adds money to your account. Expenses, on the other hand, are anything that you spend money on. They can be broken up into 2 categories.
- Fixed expenses are reoccurring monthly costs that are the same each month.
- This includes things like rent or mortgage payments, car payments, class fees or membership fees, and any subscriptions you have
- Variable expenses are things that cost different amounts each month or don’t regularly occur.
- This includes things like utilities, groceries, clothes, gifts, eating out, travel expenses, and car repairs. Some variable expenses are fairly regular, but some are unexpected.
Steps to Follow:
- Gather your financial records.
Having all your information collected makes writing everything down much faster. This process can include getting bank statements (paper or mobile), receipts, checks, etc.
- Begin by writing down your income because this is generally the easiest step.
- Start with your regular income
- Then look at income from any investments
- After that, focus on side jobs or hobbies
- Lastly, look at any other source such as gifts, scholarships, or government grants.
This is where you pull up your credit card statement and jot everything down. It can be easier to track spending weekly, so the end of the month feels less overwhelming. Then there isn’t one day where there is everything to document.
- Start with your fixed expenses because these are straightforward. What do you make payments on? What subscriptions or membership fees do you have? What is your rent or mortgage payment? What other expenses are like these?
- Then move to variable expenses since these require more digging. This category includes everything that your fixed expenses missed. Exactly how much did you spend on groceries? on eating out? Did you have any car trouble or unexpected expenses? Did you do any traveling? How much was gas this month?
This is called your “net income.” This money is what you can put towards savings or debt reduction! Savings can include fun things like a toy or a trip, holiday savings, an emergency fund, or other things you want to budget for. Debt reduction focuses on making payments toward any loans or debt. This could be increasing your car or mortgage payments to pay it off faster. It could also be working on paying student loan debt.
If you don’t like what you see, you can seek help in ways to cut expenses or ways to increase your income. FFMe offers financial counselors that can walk you through this process one on one.
For many families, this process can start with decreasing spending on eating out. It can also be limiting the number of subscriptions you have.
We will be sharing more on goal setting next week, but for right now, focus on figuring out what you'd like to save for or what debt you want to focus on.
If you need help thinking of what to write or how to track it, Financially Fit Me offers a simple budgeting worksheet under “tools” to help you get started. To access it, register for a free account on our website. This worksheet has a spot for you to enter everything in, and it does step 4 for you automatically. Start budgeting this week, and see how your finances improve.
Visit Financially Fit Me at https://financiallyfitme.com/