A couple weeks ago I saw a a post on twitter that loosely said, “Who else does not budget and simply looks at their checking account to see what charges are there and how much money is left?”
For the love of all that is beautiful, if you do this please stop doing this.
Because this is the easiest was to spend unnecessarily and cause yourself avoidable stress.
I know that some people view impulse buying as a source of joy. Your brain gets a jolt of hormones when you buy something. The question is: Are you willing to break up with that self-sabotaging behavior?
Wouldn’t you love to be able to predict how much your bills will be and how much money you’ll have left over to save and spend?
Of course you would! If you answered, “No, the way I’m doing things now works just fine,” every ounce of my mother and teacher instincts wants to talk sense into you.
I understand that haphazard spending may be the only way that you know. It may be the only way everyone around you operates. That doesn’t mean that’s what you deserve. Tradition is not a reason to harm yourself.
You deserve better.
I understand that maybe you’ve heard people talk about budgeting but no one has thoroughly explained how to budget.
That’s why I’m here.
I have previously written about doing a no-spend month. Many people who encourage no-spend periods encourage doing a budget before the no spend period starts. My thought is that asking you to do this is meant to scare you straight and/ or inspire you to do the no spend period.
I waited until we’ve already started the no-spend month because I’m more concerned with looking at your previous spending and creating a budget to be purely informational and a starting point for the person you will be after you successfully complete the no-spend month.
In order to create a budget, you need to know what your expenses are. This is easy because your spending is currently bare bones.
First, I want you to do a victory lap.
Take a piece of paper and fold it in half vertically. Write “Pre No-Spend” and “Now.” You can also buy my book Bill Tracking and Budgeting For Exhausted People. This book has these exercises as well as additional tips and exercises in it.
On that piece of paper or in your workbook, list your monthly expenses before no-spend. If you need assistance with this, look at your banking statements for the past 3-4 months. Some bills like your phone, electric, gas and some others fluctuate slightly. By looking at a few months you can get a better number for your budgeting. Use the highest number. Write every “bill” down; utilities and recurring payments. Do not write down shopping. Add up the total and circle it.
Next, list your bills after starting no-spend. Add up the total. Highlight all of the bills that appear on the first list but not on the second. Calculate the difference and highlight it as well. These are just the bills and not your total spending but you should have eliminated a decent amount of expenditures.
Insert victory lap here-> ->
Now you are ready to create a budget.
On you budget worksheet or on a new piece of paper write down all of your sources of income. If your income fluctuates, do the same as you did for bills but I want you to be more conservative. Look at your banking statements for the past 3-4 months. Use the lowest number.
Transfer all of your bills from your bill tracker to your budget. Why do I want you to use the highest number for bills and the lowest number for income? Because that way you will not be surprised by not having enough money to cover unexpectedly high bills.
After you have accounted for your income and your bills, you need to take a preliminary total. Hopefully your income generously exceeds your bills. The amount of money left over after bills is the money you need to budget for all of your other expenses.
“Other expenses” are not childcare, transportation (consistent public transportation expenses or car notes/ insurance), and any other recurring bills that you paid during no-spend. These should already be accounted for. Other expenses would include bills you have chosen to add back after no-spend. These could be hair and nail care, pet care and grooming, memberships and subscriptions. You also want to include allocations for food and gas. The best starting off point for these numbers is to look at your bank statement to see how much you spent on these during no-spend because these amounts should equal your bare necessity.* You may decide to add a little more to your food and gas budget or you may decide that you want to stick with these low costs in order to add money to another categories. Your monthly expenses should also include savings and miscellaneous expenses.
When you have finished adding all of your “other expenses,” your income minus expenses should be zero. Why zero? Because you don’t want to leave projected money on the table. You want to pre-determine how much “fun money” you have each month and any additional money should go to savings. One caveat is: If you have a fluctuating income and you used my method of using a high number for projected expenses and a low number for projected income, you may have extra money in your bank account each month. I like to move that money to savings each month.
If you have a budget shortfall and you are unable to allocate even $20 to savings or your expenses exceed your income, you need to look into ways to supplement your income.
The budget itself should not change every month. When filling out a budget worksheet each month, the expected variations are added expenses from splurges or unexpected expenses and hopefully additional income. You should keep track of these variances each month and reflect on them at the end of each month.
In my book Bill Tracking and Budgeting For Exhausted People, I explain howyou can write a one week and two week budget.
*if you are starting this budget before the end of no-spend, you can leave these two areas blank until the end of the month or look at these numbers halfway through the month and double it.