Get Started with this Budget Blueprint [Template]

Before you can maximize your savings or invest your earnings, you need to build a solid budget. Once you have abudget in place it’s simple to tweak and analyze your costs. Below are steps to get started on a budget. This may be intimidating at first, but you can start using round about numbers, then fine tune using to exact figures.

If you do not already have a budget, that’s okay. Only one third of American households have a detailed budget. Creating a budget will put you ahead of two thirds of Americans, and one step closer to your goals. That means most people have no idea where their money is being spent!

What it feels like when you’re creating your budget.

I suggest you use the FREE Google Sheets version that I have linked HERE  by saving a copy of your own or you can copy and paste it into Microsoft Excel.

Budgets need to be tailored to the individual or the family and will vary depending on your financial situation. There is no “one size fits all”, but this is a great template.

Lets get started.

General rules:

  • Share this information with your spouse or others in your household.
  • It’s best to round down on income and up on costs if you are not using exact figures.
  • If the cost fluctuates month to month use the highest reasonable cost (winter heat bill)
  • It’s safer to over estimate on expenses and have money left over, than to be short and out of cash.
  • If a cost is quarterly/yearly, divide it out by 12 months and include that cost (taxes).

Income:

Start with the green income box. Calculate your monthly net income (after tax) (G3). Below you can also put any other forms of income such as payments from disability, retirement, pensions, dividends, rental income, or side hustles.

Fixed Expenses:

This is where we start subtracting from your income total. Start with calculating fixed costs (column B). If it is a set monthly payment and does not fluctuate consider it to be fixed. (Your car payment is going to be $250.00 every month, and your rent is going to be $500 every month.)

  • The monthly expenses on groceries in this column is your “Hot dog diet.”
  • Your water, gas, electric, and fuel expenses are the highest you can reasonably expect to pay per month (winter heat).
  • If you have a pet, put only what you absolutely need (food and vet bills).
  • For things like doctor copay’s, haircuts, or car maintenance use your average monthly cost (if you’re a guy, you can shave your own head).
  • If you have credit card debt, or other loans, put the minimum payment due in the fixed cost column.
  • Divide the cost of bills/expenses that come quarterly or yearly (HOA fees, vehicle registration, taxes) by 12 to get the monthly cost.

Variable Cost

This column (C) is the “wiggle room” column. Hopefully at this point you have a positive number in cell H16; if so, skip down to the “Fine Tuning” section. If not you have NO wiggle room and you need to cut your fixed costs immediately. If this is the case see CODE RED status below.

CODE RED

If your fixed expenses are greater than your income you probably already know you’re struggling.  You need to start cutting costs or generating additional income. Hopefully outing where your income is gong, will help you identify leaks. Remember, you only need food, shelter, and water (think basics). Everything else is negotiable. Transportation costs can be a high cost category. Using public transportation or purchasing a cheaper (lower payment, taxes, insurance) fuel efficient (lower fuel costs) can cut this cost. In my next post I will touch on what your budget should look like.

Money Maker

Start saving so it will grow!

If your fixed expenses are less than your income you are in the clear…this month. However, if the remaining balance is not large enough to cover a big bill such as unexpected repairs, vehicle registration due, or even a small emergency, then you need to back up and read the CODE RED section above.

You should always pay yourself first! This means there should be savings built into your fixed expenses. This will help build your emergency fund. If you already have an emergency fund (3-6 months of fixed expenses), than this savings can be invested or added to retirement savings.

If you feel comfortable with you remainder after fixed expenses, we can go ahead and tune your budget so it works for you.

In column C define your variable expenses. These are expenses you can control or change each month.

PRIORITIZE your tuning. Don’t start getting your nails done if you have credit cards to pay off. Don’t sign up for HBO without putting an extra $50 toward your student loans. That might sound obvious but, its easier said than done.

  • Make sure you have enough to cover costs that you averaged or that you were unsure of (maintenance).
  • Put extra money toward your debt- I recommend highest interest first.
  • If you don’t have anything in your savings, this would be a great place to start.
  • If you have something in your savings this would be a good place to go next.

Luxury Cost

Now it’s time to splurge (a little). If you are completely positive you have all expenses covered (you have an emergency fund, and you are chipping hammering away at your debt) you can increase your standard of living and/or give yourself an allowance. For instance, you would enjoy spending an extra $25 dollars a month on groceries to eat steaks once a week or purchasing name brand granola instead of the store brand. You may also enjoy getting your nails done or your haircut more frequently.

  • In groceries put your “Steak diet”
  • Clothes (you can actually replace the socks with holes now)
  • Cable (maybe you like HBO or Netflix)

Maybe you don’t mind living below your means, that’s fine. I would, however, recommend you give yourself an allowance. It can be $10 dollars a paycheck, it could be $200 a month. This is your money to BLOW guilt free. Use it on beer or on dumb stuff. Save it up for something big like a new phone. This is your allowance to do what you want but you shouldn’t feel guilt spending it. This is the diet equivalent of a cheat meal. Don’t get crazy, but set a number and stick to it.

Is my budget correct?

Well, it depends on your financial goals. If your goal is to make sure all of your expenses are covered than the simple steps above can answer that question. If you are looking for further budget analytics check out my next post on how to analyze your budget.

 

 

 

Thank you for visiting The Financial Robot. If you have any suggestions on how to make the budget template better let me know. Do you already have a budget? If so, how do you prioritize? Leave me a comment below and sign up for email notifications.

 

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