How To: Make Your 2010 Budget

Making a budget is tough! For starters, you can’t just go out and make your budget. Why? Well, how are you going to know what to budget if you don’t know what you already spend?

Be Realistic

See, this is usually what happens with budgets. You make your budget. You estimate $100 for groceries and $50 for eating out. By the second week, you’ve already exceeded both of these budgets. Not wanting to starve yourself, you declare budgeting to be “stupid” and “a waste of time.”

A budget is only successful if it is realistic. So, let’s start with my Beginner’s Budget template that I’ve already created just for you. (Yes, you!).

First, Determine Your Expenses

View the Beginner’s Budget in GoogleDocs.
Make sure you’re in the Previous Month Expenses tab.

Have the spreadsheet document opened up in another window next to this one. Now, go to your online bank statement for the last month and fill in how much you spent in each of these categories.

Now we have our monthly expenses. Look this over. Does anything stand out as looking odd to you? Did you spend more than you thought on restaurants or electricity? Keep this in mind when making your budget.

Second, Set a goal

Before we get started, you need a goal. Are you trying to save up for a trip? Do you want to increase your emergency fund? Do you just want to cut back eating out at restaurants? Are you saving to buy a new car? Whatever your reason, you have to have one!

This is another reason why budgets fail, because people don’t have a goal so they lose their motivation and discipline. Also, having a goal means we know how to set-up your budget. Let’s just say that your goal is to save money for a big vacation. So you’ll want to put more money than you are now into your savings account each month.

Third, Budget

View the Beginner’s Budget in GoogleDocs.
Make sure you’re in the January Budget tab.

Here’s my Paycheck Budget. If splitting up the month in this way doesn’t work for you, then just combine everything to suit your needs. The key is to keeping your fixed & variable expenses separate.

Okay! Now we can start filling in the blanks using your expenses worksheet as a guide. Start with income then just go down the list. The fixed expenses should stay the same. Although seeing the percentage of the expense might be an eye-opener to you.

For the variable expenses, start with your savings. Since this is our priority, we will want to make sure we have enough money to put what we want into the savings account. Also, be sure to put more in there than you were before. (Remember your goal?) Then just go from there.

Remember to keep this realistic. If you spent $300 in groceries last month, don’t budget $100 this month – that just won’t work. You could, however, budget $250. You will just have to instill some discipline to not spend those extra $50.

Stick to it

Okay, so now we have our realistic budget. Here comes the hard part…. sticking to it throughout the month! Well, there are some tricks.

You can include looking at your budget as one of your weekly “chores” (so-to-speak). That way it won’t take you forever to go through your expenses and track them in your budget. It is definitely best to do this at least once a week so you can see how you are doing on your budget as the month goes on.

I use Remember The Milk and just add “Look at budget” as a weekly item on my to-do list.

You can also use Mint.com which will send you alerts if you are nearing your budget for a category but you really should be aware of your own spending.

At the end of the month, you’ll just go over your budget and see how you did. You will continue to use this as a template for the rest of the year but remember to make changes accordingly. Also, if I know I will be purchasing a gift (birthday, holiday) during a particular month, I will include the category “gifts” and budget for it. This just might mean that I have to spend less on entertainment for the month. That is where your priorities come into play.

Good luck!