Nobody likes to budget. Budgets feel like a limitation that prevents us from doing what we want with our own money. But the reality is that a good budget helps you use your money as a tool to get you what you really want. A budget will help you know your priorities to focus on them and make your dreams a reality. It can be hard to get started with a budget, so in this article, you’ll see a great example of a budget to help you craft your own.
Budgets can be challenging to get started. However, you can make your money work for you by creating budget categories such as housing, transportation, food, savings, giving, and entertainment. Then, by planning how much you want to spend in each category, you can use your money as a tool.
In this article, we’ll give you a sample budget that you can look at to help you create your own budget. Then, we’ll give you tips and suggestions to help you get started the easiest way possible so you can control your money to get what you really want. But first, we’ll take a look at why you need a budget and how to stick to it.
Why Do You Need Your Own Budget
You need your own budget because every household is a little bit different. Your expenses will not be the same as your neighbor’s or your best friend’s, so you’ll need to figure out your budget all on your own. However, if you look at my sample budget, you’ll get a great idea of how to get started crafting your own budget.
Budgets help you use your money to get the most out of it. They also help you plan for irregular expenses. For example, you can create an emergency fund with a budget, so you aren’t caught off guard by surprise repairs or drops in income. Budgets can also help you know how much you can afford to spend on larger items such as a home, a car, or vacations.
Your bank account is a reflection of your needs, wants, and priorities (or lack thereof!). But if you don’t watch how you spend your money, you can easily fritter it away on things that aren’t important to you. A budget will help you prioritize how you really want to use your money so you can control it without allowing it to control you. Think of a budget as more of a spending plan to help you stay in control.
How to Stick to Your Budget
Budgeting can be hard work, but the results are worth it if you can stick to it. Of course, to stick to your budget, you may need to use a little self-discipline and some creativity. But you can do it with a few tips.
Make it realistic.
It might sound great to pay extra on your mortgage or put thousands of dollars into savings every month, but if that isn’t realistic for the amount of money you actually make, it just won’t work. You’ll just be setting yourself up for disappointment when it doesn’t happen. So instead, try to find balance in your goals to create a budget that actually works with your income and expenses.
Avoid impulse purchases.
One of the hardest parts of sticking to a budget can be impulse purchases. Maybe you love a good sale, or there’s a great pair of boots just calling your name! But if the money isn’t in the budget, you just can’t buy it. So if impulse purchasing is important to you, you’ll need to make a line item in your budget for those deals you can’t pass up.
Wait it out.
Another trick to avoid budget-busting impulse buys is to wait a day or a week before purchasing the item you want. Then, if that item is still important to you after a week, you might want to consider shuffling your money around to fit it in your budget, if possible. Most likely, in a few days, you won’t be pining for that miscellaneous item you never knew you needed in the first place.
Plug the leaks
When you look over your bank account, keep watch for any budget leaks. These are places you spend money that you don’t really need to spend. For example, internet or app subscriptions that you no longer use but are still on autopay, extra coffees at the coffee shop, or other random expenses. The tighter your budget, the more ruthless you will need to be at plugging the leaks.
Eat at home
Eating out is a big money suck. Imagine it’s like taking a vacuum cleaner to your bank account! Not only do you waste money on prepared food, but you are probably losing money on food you thought you would eat at home but don’t. So do some meal planning and save time and money!
Don’t shop for fun!
If you need to tighten up your budget, you need to avoid shopping for fun, as a hobby, or out of boredom. Only shop for what you need to save money for more important things.
Being frugal is an important part of budgeting. If you want to make your money work harder, spend less wherever you can. For example, why pay $30 for a t-shirt when a similar one is on sale for half the price? Being frugal helps the same amount of money go much farther when it comes to your budget.
When we don’t plan ahead, we spend extra cash that probably should go elsewhere in our budget. For example, if you didn’t plan to take lunch to work, you’ll probably end up eating out (which shrinks your budget and probably extends your waistline!). If you plan ahead for gift-giving, you’ll have more time to get items on sale rather than paying full price for the same thing.
Credit card interest rates are a big budget buster. You’re better off saving up for something you want and purchasing it with cash. Then, you’ll save on interest, and your money will go further.
Don’t beat yourself up over mistakes.
We all make mistakes, especially when we make our first budget. It’s ok! Don’t blow the rest of the month off because you didn’t do it perfectly. Just pick up where you left off and try again.
What Expenses Should You Include in Your Budget
Your most important items will always be food, shelter, clothing, and transportation. You need to make sure these items are covered before adding in all of the extras, like cable, entertainment, and fun money.
As you look at the individual budget categories, think about which things are most important to you. For example, do you want a nicer house but an older, cheaper car? Do you prefer to eat out rather than cook? Do you need to spend a lot of money on childcare but none on transportation because you walk everywhere? Your expenses will help you determine your priorities.
Take a look at the following categories:
Shelter is generally the most significant expense in your budget. Some budgeting experts claim that your housing costs (including taxes and utilities) should be no more than 30% of your income. This can vary, especially if you share expenses with a few roommates (making it less expensive) or are a single parent.
If shelter costs you more than 30% of your gross income, you may want to consider looking for less expensive housing to make things more manageable. Some costs you might find under shelter include:
- Mortgage payment or rent
- Utilities such as electricity, internet, phone service, water, and trash removal
- Repairs (if you rent, this may not be necessary)
- Property taxes
When you look at the cost of shelter, you’ll want to keep in mind the cost of renting versus purchasing if that is an option for you. Some rental properties will include utilities, while others do not. Buying a home may save you money in the long haul, but you need to make sure you can afford all aspects of homeownership, including the taxes and repairs.
Your food bill is every food item you purchase and consume except for eating out. Take out and eating at restaurants is generally included under entertainment. Your food budget should be around 10 to 15% of your income. It’s very easy to overspend and waste food. Meal planning will help you keep these costs under control. You might include in this category:
- Paper goods and household cleaning items
- Pet Food
- Personal care and hygiene items
If your food bill is out of control, you may need to reign it in by purchasing less prepared foods and spend more of your time cooking.
Transportation should make up about 15% of your total income. This would include car payments, gas, repairs, and insurance. However, if you live in a place where you take public transportation, this category might be a lot less.
If your transportation budget is overly high, you may want to consider why. Is your car payment too high? Do you need to refinance the payment or sell your expensive car to purchase something a little cheaper? Is your vehicle ancient and requiring too much money for repairs? If so, it might be time to look into a new car.
Are you spending too much on Uber, taxis, or public transportation? Would purchasing a car or carpooling with coworkers be a better option?
If you are someone who enjoys giving to charities or churches or helping others, you’ll want to create a line in your budget. Many people believe you should give at least 10% of your income to others. Not only does it help others, but it also helps us to keep our lives in balance by giving to others.
Saving is also essential. If you are new to budgeting, you might first need to save up an emergency fund. If you already have an emergency fund, you might want to start saving up for your next vehicle, vacation, rain day, and retirement. If you have money to put into savings, you may want to talk to an accountant about making investments, as well.
In this sample budget, you’ll get an idea of how to create your own. However, you can’t just copy and paste it as your own. This sample budget is more of a starting place to help you see some of the expenses you’ll need to include. Later in this article, we’ll discuss how you can use these items and edit them to fit your own personal spending.
Imagine that your income is $100,000 a year for this sample budget, and you pay 25% in taxes. Therefore, your monthly income would be $8,333. These easy-to-work-with numbers will give you a sense of what a budget looks like so you can adapt it to your own needs.
|Amount Per Month
|Percentage of Budget
|Rent or Mortgage
|Water and Sewer
|Paper goods/Cleaning supplies
This is an example of a zero-line budget because your budget plan exactly matches your income. This is great for beginners, so you learn to control every dollar that you spend. There are a few additional categories you may need to fit in, depending on your situation. For example:
- Miscellaneous household expenses (such as stamps, printer paper, etc.)
- Emergency Fund (if you don’t already have one)
- Work expenses
If you have extra, unexpected funds, you can funnel them into savings, investments or create a slush fund. Slush funds are like having an extra month’s worth of money for each item. This way, if the bill is due before your paycheck arrives, you won’t have to pay it late. It’s also helpful for people who do not make the same amount of money each month.
A slush fund will help protect you against unexpected expenses, dips in income, as well as offer a little extra breathing room if you find a great deal on an item that you are saving for.
If you decide to create a slush fund, be very careful not to fritter away the extra money on items you don’t actually need.
How to Figure Out Your Own Personal Budget Expenses
Common wisdom says you need to track your expenses for a month to create your own effective budget. But if you do all your banking online or with debit and credit cards, you’ll have a good idea of how to figure out your income and expenses without having to wait a full month.
- Find all your bank statements for an entire month. This includes credit cards, debit cards, online accounts, etc. Print them out if possible.
- Create a chart using either a spreadsheet or pen and paper. As you go, you’ll need to add a column for each type of expense.
- Go through every transaction and put it into a category: Housing, Transportation, Food, Household, Repairs, etc. You will probably want to divide each category into subcategories, as shown in the budget sample.
- When you get through all of the money, you spent for the month, add up each column and put the tally at the bottom.
- Add up the bottom row of numbers for the total expenses for the month. You might be shocked by how much money you spend on things such as eating out, clothing, entertainment.
- Watch out for irregular expenses. For example, many sewer and trash bills are billed quarterly rather than monthly. Missing some of these expenses will mess up your budget. You also need to think about special occasions such as birthdays, holidays, gift-giving, vacations, and entertainment.
Another way to figure out your personal expenses is to spend an entire month writing down every dollar that you spend and put it in the appropriate spending category. This takes a lot of discipline and hard work, but it does help you understand where your money goes.
Budgets look different for every household. Don’t worry if your best friend’s budget doesn’t line up with yours. Instead, focus on making your budget work for you. Overtime, budgeting will get easier and you’ll get better at it. And, as life changes, you’ll be able to tweak your budget to meet your changing needs.
Should I use a zero budget?
A zeroed-out budget means you make a plan for every dollar you earn. This is great for very detail-oriented people. If you are less detail-oriented, you can make an approximate budget as long as the amount you earn is more than the amount you spend. Anything leftover at the end of the month can be part of a slush fund for irregular expenses or put into savings.
What if my income is lower than my expenses?
If your expenses are higher than your income, you have two choices. Lower your expenses or increase your income. You may have to do both to make your budget work. For example, if your monthly debts are high and make your budget impossible, you might need to temporarily increase your income until you get your debt under control.