How to Set Up a Budget

Photo by Karolina Grabowska on Pexels.com

You want to budget your money, but don’t know where to start? Let me help!

First of all, I am truly excited to share with you how easy it is to start managing your finances. I strongly encourage you to start now because the more money you can set aside to save, the closer you will be to…

  • Having a vacation
  • Having money for retirement
  • Having money for a puppy (or whatever you want)
  • Feeling confident and organized with your money

These are just a few reasons why it is important to start budgeting.

6 easy steps to get started:

  1. Set realistic financial goals for yourself. Without a reason, you won’t do it.
  2. Decide where you will budget. On an app, Excel, Google Sheets, or in your notebook? I use Google Sheets. See my budget templates here.
  3. Write down your monthly income and total monthly expenses. Income minus expenses equals net income.
  4. Decide which expenses you could reduce. For example, downgrading your phone plan to save money each month. Start reducing costs if possible. (The goal is to save money) Or, find ways to increase your income instead of cutting expenses.
  5. Make a monthly routine for budgeting. Every time you get paid, you need to look at your bank account app or receipts to track how much you spent and how much you made. This should be an ongoing, biweekly, or monthly activity you do. My suggestion is budgeting once in the beginning of the month to make estimates, a second time in the middle of the month to make adjustments, and one last time at the end of the month to make final adjustments.
  6. Track your progress to achieve your financial goals! And stick to your budget. Don’t forget to update it as you make purchases.

Where should I put the extra money left over?

You need a safe place for your savings. Open up a savings account within your bank! Basic savings accounts are great because you can easily access the funds when needed. If you are a student, look to see if your bank offers student bank accounts. They usually do not have any annual fees!

Another option is to open up a HYSA, also known as, High Yield Savings Account. This is a bank account with higher interest rates. This means they will pay you higher interest compared to a basic savings account. Look online to compare the options, but be sure to check that they have no annual fees, or hidden fees. Learn more about HYSA’s here.

The next step beyond a basic savings account is opening up a retirement savings account. With a retirement account, you won’t touch the money and you will add to it over time to build wealth. I save with Vanguard and have a Roth IRA. There are other options like having a 401k, or a traditional IRA. IRA stands for Individual Retirement Account and is a tax advantaged retirement account for after tax dollars. The Roth IRA does not pay interest however, you have to pick the investments. This takes more time to learn about so I will link my favorite, reputable finance website to touch more on this subject. See link here to learn how to fund your Roth IRA. (I live in the US so not all products or services may be offered in your area.)

Learn the difference between IRA & Traditional IRA here.

How I budget on Google Sheets

I used to be so disorganized. I had no idea how much I was making per month, and I also didn’t know how much my expenses totaled to. I didn’t even have a savings account. I made no progress with saving money. It was not working.

After going to school and paying for everything out of pocket, I realized I needed to know exactly how much I could afford. I made a list of all my expenses and started managing my finances every time I got paid.

This is how my budget is set up on Google Sheets.

Why Google Sheets and Excel are great tools to use:

Another reason to use Google Sheets or Excel is to get familiar with it. Many jobs require you to have basic skills using either. They even have formulas that can do the math for you. Use my budgeting templates today!

Conclusion

  • By budgeting, you will have more money to save for vacation, retirement & emergency funds.
  • You will get better Google Sheet/Excel skills that jobs require
  • You will be excellent at managing money
  • You can stop throwing money away on unnecessary things and save instead!
  • Organized and Responsible

Watch my YouTube video for how to set up your budget for 2021!

Published by Dana Johnson

Hi, my name is Dana and I help teach the value of budgeting & saving early on in life so you can achieve your financial goals.

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