A monthly budget was never been my priority. It was not until later that I realized that e
I was never a budgeter even when I was single but I tried to save as much as I can and spend wisely.
I carry credit card balances but I try to pay more than the minimum each month.
When I got married, my husband was not a budgeter either but he is more into saving than I am. We save 10% of our total income and we had it automatically debited from our account every payday so we do not have to think about it.
However, although we were saving, we are not actually aware where the rest of our money is going.
We spend thinking that we are earning enough to cover whatever we are spending on.
It was not until we started our fertility journey that we decided to sit down and figure out our finances. We wanted to find out if we have enough money to cover fertility expenses.
So, I added all our income and went over bank statements, utility bills, credit card statements and other expenses.
Then what I found out was a shocker!
Almost half way of our total income was spent on dining out! I guess that’s where the money usually go when you do not have kids.
And our expenses was more than what our income was! So we are actually spending money that we do not have.
After finding this out, I decided it is time to create a budget. I made a monthly budget and we try to stick with it but it was hard, we still went over our budget.
But this time, it was not as bad as before. We were now mindful on what we were spending on.
It took us three months to be able to polish our expenses and be able to stick to our budget. It was not perfect but it worked.
Definitely, it was hard work but it was worth it. I have now a peace of mind knowing that we are actually saving money and not living beyond our means.
To help you work on your budget, I will walk you through the steps that I took to come up with a realistic monthly budget.
You can also download this Quick Guide to start your monthly budget.
Figure Out Income
The first thing you want to do is figure out how much your household is making. The total will include earnings from your full time job and other side hustles.
However, make sure to separate fixed income and variable income. In that way, you will only be budgeting on the money that you are certain to receive that month.
If your income is varies form month to month, it is recommended that you take the average and budget on that.
Now, it’s to to see where your money is going. You will need to figure out your expenses in the last 30 days. In order to do this, you will have to print out bank statements, credit card statements and paypal statements if you use one.
Next, you will then categorize each expense. It can be food, utilities, mortgage, car, loans, etc. By the time you are done, you will see that pattern where the bulk of your money is going.
Now that you know your total income and your total expenses, subtract total expenses from the total income and the difference should be the left-over of your monthly income.
If this number is not NEGATIVE, Congratulations! You are doing good in spending. You still need to create a budget in that way you will know what to do with your leftover money.
If the resulting number is NEGATIVE, don’t panic! That’s why we are going to do budgeting to make sure you are spending wisely.
Now, go back to the categories of your expenses and categorize them further into Two categories, fixed and variable.
Fixed expenses, expenses that you cannot change like savings, mortgage, car loan, student loan, utilities etc.
Variable Expenses are the ones that can vary every month like groceries, dining out, personal care etc. This category you can tweak as you work on your budget.
Now it’s time to budget.
Take a look at your variable expenses, then budget an amount that you think is appropriate for each category. Be realistic! It should be a comfortable amount. Then take the total of the budgeted amount and add it to the fixed expenses.
Now, take the difference of the total income – new total of expenses.
The difference should be 0 or more. If you are still on the negative, go back to tweaking your variable expenses until you get to at least zero.
For those who have more than zero result, it is time to take care of the left over money.
It is always best practice to tackle your debts when you have extra money. You can put some extra payments on credit cards, mortgage, student loans etc.
One of our family’s priorities is emergency fund. This money is to be use for future emergencies. If you still do not have emergency fund, this is the best place to put your left over money. You can learn more about emergency money here.
If you already have one in place, then continue funding it until you reach three months worth of expenses.
You can also come up with a list of future expenses that you want like house, car, vacation etc and then just prioritize them accordingly. You can just spread the left over money into those future expenses.
There you have it!
Creating a budget is not hard at all, it is the ability to stick with that makes it hard. The first few months won’t be perfect but you will get the hang of it. Until now, we still sometimes go over our budget but it’s ok at least we are in control of our money.
Do you have a budget? How are you sticking with it?
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