You’ve heard me go on and on about budgeting. So, how do you make one? It’s not too tough, let me show you!
Why make a budget? There are all sorts of reasons. First, it’s easier to see what you’re spending your money on and when. I’ll show you a little later how we can use the insight we get from your budget to make spending and income decisions more clearly. It also helps you prioritize your spending, which is a big help when you have periods of variable income. Speaking of variable income, I’ll show you how to deal with big fluctuations in income and smooth things out. Finally, I’ll show you how to use a budget to analyze your cash flow to make sure that bills get paid on time, every time.
So, let’s guide you through making a budget step-by-step. First, get yourself a piece of paper or spreadsheet program. I’m using Google Docs, but OpenOffice.org or even Microsoft Excel will do the job. If you’re using a spreadsheet program (instead of pencil and paper), there will probably be fewer math errors. I will share the Google Docs file I use for the budget examples in stages.*
Our example today will be “Trish A. Example,” a young college grad who’s just landed her first “real job.” We’re going to look over her shoulder as she builds her first budget. Trish has set aside a rainy Sunday afternoon to work on her budget, and she has her banking statements, pay stubs, and bills handy.
The first thing Trish does is write down the title of what she’s making on her spreadsheet and save a copy. This will be handy in case she forgets which month she’s doing.
Now Trish is ready to get her income sources organized. Since she has a few sources of income, we will deal with her budgeted income in the next post: Smart and Sassy Guide to Budgeting: Part 2: Income.
*Disclaimer: This is just something I slapped together, so there may be errors in the functions. I’m not making this with any warranties or guarantees. Use at your own risk.