How To Quickly Create A Simple Budget For The First Time Ever
Did you recently score your first full-time job where you receive an income you’ve never had before?
Well, then, it’s time to start budgeting that hard-earned cash cuz if you earn an income, you need a budget.
You’re never “too young” or “not making enough money” to budget, and, the sooner you create a budget, the quicker your finances will become stable.
And, what can you do with stable finances? Literally anything.
So, let’s dive into the simplest budget ever. (Seriously, you can have this budget set up in under an hour.)
If you missed it, this budget can be set up in as little as an hour and will last you a literal lifetime. Uh, score!
You’ll simply have to adjust your percentages (more on that later) whenever your income and/or expenses drastically change.
See, we’ll be setting up a percentage-based budget that is 100% customized to your income and expenses, so it’s fool-proof.
This quick + easy budget is perfect for
- budgeting beginners
- couples combining their finances
- somebody looking to get out of debt
- people trying to clean up their finances
- literally everybody
Because this budget can be customized to your specific income and expenses, it is easy to say that it is perfect for everybody.
This 5-step approach to setting up your budget and automating it can be completed in as little as an hour and will help you get rid of money stress, ASAP.
The five-steps to your perfect budget are:
- Establishing Your Income
- Establishing Your Fixed Expenses
- Establishing Your Variable Expenses
- Creating Your Perfect Budget
- Automating Your Budget
So, let’s dive in!
STEP 1 // ESTABLISHING YOUR INCOME
To create your perfect budget, you have to establish what your monthly income is.
To do this, simply gather a months worth of paystubs and average out how much you take home on a monthly basis.
For example, if you make $500 every paycheck (AFTER TAXES) and you’re paid weekly, you can assume that on average you will make $2,000 every month.
If you are not paid a predictible income each month, (or you have multiple streams of income), don’t panic! You can still figure out how much you earn on average each month by doing some very basic math.
Follow these steps to establish your average monthly income:
- Collect 4-6 months worth of paystubs or income reports from every source of income
- Add together all income AFTER TAXES
- Calculate your average monthly income by dividing the number from step 2 by as many income amounts you added together
Let’s look at Bob’s income, for example:
STEP 1: Collect 6 months worth of Bob’s income
STEP 2: $1,300 + $1,700 + $1,550 + $1,900 + $2,100 + $1,400 = $9,950
STEP 3: $9,950 divided by 6 = $1,658
So, Bob should use this average monthly income of $1,658 to work out his budget.
Once you establish your average monthly income, it becomes very easy to create a simple budget using more basic math.
STEP 2 // ESTABLISHING YOUR FIXED EXPENSES
Once you’ve established your average monthly income, you can figure out if you’re spending your money in a smart + cost-effective way.
To do this, you’ll start by establishing your average monthly fixed expenses.
To calculate your average monthly fixed expenses, follow these 2 steps:
- List out all fixed expenses + their amounts
- Total all fixed expenses
Isn’t basic math lovely? Especially when it will save you hundreds of hours and dollars in the future.
Remember, a fixed expense is any bill that you pay on the same date every month and for roughtly the same amount. Some examples of fixed expenses are:
- Gas + Electric
- Car Insurance
- Cell Phone Bill
- Credit Card Bill(s)
- Monthly Subscriptions, such as Netflix + hulu
Once you’ve calculated your average monthly fixed expenses, we can calculate your variable expenses.
STEP 3 // ESTABLISHING YOUR VARIABLE EXPENSES
Just like we calculated our average monthly fixed expenses, we have to establish our monthly variable expenses, too.
Variable expenses are those that happen sporadically throughout the month and for varying amounts.
Some examples of variable expenses include:
- transportation costs
- take-out/dining out
- activities + entertainment
Because variable expenses are harder to account for, it is essential to your budgeting success that you track your spending.
Otherwise, you won’t have an accurate number for your variable expenses, which will ultimately mess up your entire budget.
You can start tracking your spending instantly when you grab our financial planner.
So, once you have accurate numbers for your monthly variable spending, you can calculate an average the same way you did for your fixed expenses.
Simply write down your average spending for each spending category in your life and add them up.
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STEP 4 // CREATING YOUR PERFECT BUDGET
So, have you ever heard of percentage-based budgeting?
We’ll be creating your budget based on that concept, but it will be customized to your exact financial needs.
With the knowledge of your income + expenses, you can set up your budget accordingly, to ensure that you always have enough money to afford your bills.
Simply follow these steps:
- Divide your average monthly fixed expenses by your average monthly income (this will tell you what percent of your income needs to go towards your fixed expenses each month)
- Divide your average monthly variable expenses by your average monthly income (this will tell you what percent of your income you spend on miscellaneous spending each month)
- Use remaining percent of your income for whatever works best for you, including, savings, paying off debt, traveling, etc. (this is where you can customize the percentage-based budget to your specific lifestyle)
STEP 1 – $1,750 (average monthly fixed expenses) divided by $2,500 (average monthly income) = 0.7 OR 70% for your fixed expenses
STEP 2 – $600 (average monthly variable expenses) divided by $2,500 (average monthly income) = 0.24 OR 24% for your variable expenses
STEP 3 – Use remaining 6% of income to contribute towards savings, paying down debt, traveling, etc.
Setting up your budget in this simple way ensures that you have enough money each month for your fixed and variable expenses, while also giving you the flexibility to easily use your remaining income for whatever you want.
And, to make your budgeting life even easier, you should automate your budget so you never have to stress about money again.
Pssst! Do your monthly expenses exceed your monthly income? Then, clean up your finances with our Ultimate Budget Boss Bundle (It includes your must-have financial planner!)
STEP 5 // AUTOMATING YOUR MONTHLY BUDGET
To really, really ensure that you never miss a payment or feel stressed about money ever again, we’re going to automate your budget.
This step will be super easy since you already know which percent of your income is needed for what. (However, you will be needing more than one bank account, so if you don’t already have those set up, you’ll wanna get in touch with your bank.)
First, let’s automate your income by following these steps:
- Open a bank account SPECIFICALLY for your fixed expenses + directly deposit X% into it each pay cycle
- Open a bank account SPECIFICALLY for your variable expenses + directly deposit X% into it each pay cycle
- Open bank account(s) SPECIFICALLY for [anything else] + directly deposit X% into it each pay cycle
For example, using the percentages we calculated in the last example:
STEP 1 – Directly deposit 70% of income into
STEP 2 – Directly deposit 24% of income into
STEP 3 – Directly deposit 6% of income into
You can break your budget down into as many categories as you want + set up your bank accounts accordingly. Then, once your direct deposit is set up, you can automate your fixed expenses.
To automate your expenses, simply have your bills be automatically withdrawn from your FIXED expense account each due date.
This way, you will never miss a due date and you will never come up short for your bills.
For your variable account spending, use a debit card that is to be used for variable expenses only + track your spending in a financial planner to stick to your budget.
I set this type of budget up for my family over 4 years ago and have kissed financial stress goodbye. So, don’t wait to initiate this budget in your life.
Money was something that I was always stressing over, trying to manage multiple streams of income + expenses.
But, after setting up a budget that was made specifically with my family’s finances in mind, I haven’t stressed in years.
I know with certainty that I can afford my bills each month and can quickly + easily adjust our budget whenever anything changes.
If you stress about money, fight about money, or just want a better understanding of your finances, you need to create a customized percentage-based budget.
What are you waiting for? You can have a new + improved budget in less than an hour! Go!!
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