1. Budgeting
In 12 (not so) Easy Steps

2. Step One – The Hardest Part
Diligently Record Every Penny You Spend
At least one month
Preferably 2-3 month
Cash, check, debit card, credit card, or other
Record it WHEN it is spent, not when the bill arrives
Include sales tax
Don’t rely on your memory
There are Apps that can help
You are not budgeting (yet), just tracking your spending
Ask a friend to hold you accountable

3. Free Apps to Help Track Spending
BillGuard
Penny
Dollarbird
Personal Capital
Fudget
Wallaby
Goodbudget
Wally
LearnVest
Clarity Money
Level Money
YNAB
Mint
mvelopes

4. Step Two – Categorize Your Expenses
Categories should be applicable for YOU
Group expenses by categories that you can – or can’t control.
i.e. Don’t group rent (fixed - you can’t reduce it) with electric bill (variable to some degree – you can reduce it)
Separate eating in from eating out
Separate drinks from food
Don’t include one-time expenses with recurring expenses
Separate gas from car repairs
Don’t be afraid to create new categories

5. Step Three – Put it all in a Spreadsheet - Don’t worry about income yet
Jun-19
Jul-19
Aug-19
After-Tax Income $
Housing $
Rent
Heat
Electricity
Phone
Internet
Cable
Water
Trash Removal
Housing Total $
Car Payment
Car Insurance
Car Registration
Car Repairs
Car - Gas
Bike
Public Transportation
Airfare
Transportation Total
Student Loan Payment
Credit Card Payment
Total Loan Payments
Groceries
Clothes
Household Supplies
Personal Supplies
Personal Items Total
Dining/Drinks Out
Movies, concerts, etc.
Other
Entertainment Total
Set Aside for Saving
Total Expense
Total Income
Difference
$ (100)

6. Step Four – Add Periodic Expenses that Didn’t Occur that Month
Car Insurance
Doctor’s Visits
Dentist Visit
Tuition
Books
Car Repairs
Flowers for Mom’s Birthday

7. Step Five – Calculate a monthly amount for those periodic expenses
Take semi-annual car insurance premium and divide by six
Calculate expected car repairs for the year and divide by 12
Add these to your spreadsheet (still not worrying about income yet)

8. Step Six – Calculate Percentages
Jun-19
Jul-19
Aug-19
After-Tax Income $
Housing $
100%
Rent 0%
Heat
Electricity
Phone
Internet
Cable
Water
Trash Removal
Housing Total $
Car Payment
Car Insurance
Car Registration
Car Repairs
Car - Gas
Bike
Public Transportation
Airfare
Transportation Total
Student Loan Payment
Credit Card Payment
Total Loan Payments
Groceries
Clothes
Household Supplies
Personal Supplies
Personal Items Total
Dining/Drinks Out
Movies, concerts, etc.
Other
Entertainment Total
Set Aside for Saving
Total Expense
Total Income
80%
Difference
$ (100)
-20%

9. Step Seven – Determine your Monthly After-Tax Income
After all deductions – the amount that gets deposited into your checking account
If it changes by month due to bonuses or commission, estimate your annual after- tax income and divide by 12.
Enter it into the Spreadsheet

10. Step Eight – Evaluate your Monthly Income vs. your Monthly Expenses
Determine if you have a monthly shortage or surplus
Be sure you have included ALL your expected expenses and all sources of income
Look at your “Savings” category in Expenses
Did you include anything?
Do you think you can/should include something?
Do you already have an automatic savings plan at work?
Can’t access it until age 59.5 without a penalty

11. Step Nine – Set a Budget
Make adjustments to what you DID spend money on in the past to reflect what you feel you SHOULD spend money on in the future
Important Constraint – Total Expenses should not exceed Total Income
This often means making hard choices
Talk this over with your spouse, significant other, roommate, parents, or anyone else whom these choices might affect

12. Step 10 – Continue to Track Expenses and Income
As you attempt to follow your budget, continue to record your ACTUAL expenses each month so you will know where you overspent your budgeted amount and where you stayed under budget.
Adjust the spreadsheet to show how much you were over/under in each category
Determine if you need to make adjustments to your budget. Note that you still need to be sure that Budgeted Income equals Budgeted Expenses

13. Step 11 – Adjust Budget as Necessary
A budget is a plan. Sometimes plans need to be changed
A budget doesn’t mean that you CAN’T go out to dinner after you have spent your budgeted “eating out” money for the month
It means that you recognize that the money must come from somewhere else
Following the budget allows you to know if you are overspending and if you are, where you are overspending
Following the budget can keep you out of debt

14. Step 12 – Make Budgeting a Way of Life
Until you get to the point where your income significantly exceeds your expenses every month – without a budget….
You should plan to keep your budget
It will give you the freedom to spend money (within the budget) without worrying about overspending
It will allow you to evaluate where you can “get the money” for a special one-time expense (vacation – for example)
Your budget is your friend