I saw the craziest stat the other day:

64% of Americans live paycheck to paycheck. 😱

That’s over 210 million freaking people struggling to make ends meet.

And here’s the kicker:

When you learn how to budget your money, you can remove yourself from this statistic.

Because, let’s be real:

Without a budget, you are highly, HIGHLY unlikely to be able to afford your lifestyle, pay down debt, or save money.

It’s all good, though, because:

Creating a budget for your money is hella easy. And, when you stick to your budget, you’ll definitely be able to:

  • • pay your bills with ease
  • • get out of debt
  • • actually deposit money into that savings account that’s been at $1.67 for six months
  • • have extra money for your own personal spending

and, most importantly, your money stress with disappear.

Freaking sweet, right!?

This is our step by step guide for creating a budget that works for YOU:

  • 1. Establish Your Why
  • 2. Gather Your Financial Information
  • 3. Calculate Your Income & Expenses
  • 4. Cut Costs
  • 5. Choose A Budgeting Method
  • 6. Track Your Budget

Let’s dive in!

1. Establish your Why

Ok so, we’ve already established this:

Every single person needs a budget if they want to be financially successful.

But why.

This answer will be different for everybody.   You can determine your why factor by asking yourself what budgeting will help you achieve in your life.

For example:

You might want to start budgeting to stop living paycheck to paycheck, to free up money to pay off debt, or to save more money.

Knowing your why is essential because it creates meaning for your purpose.  Without it, you’d have no motivation to continue budgeting.

Because let’s be honest:

If you do not have a plan for your money, how are you going to afford your blessed life?

2. Collect Your Financial Information

This is crazy, but:

Most people don’t actually know how much money they make or spend.

Liiiikkkeeeeee

Here’s the deal:

If you don’t know how much money you make or spend you will never be financially free because it is impossible to make smart money decisions without this information.

So:

To avoid playing guessing games, take the time to gather your financial information before you try to create a budget so it is accurate!

It’s super simple.

You’re just gonna gather up your financial records, such as:

  • • a months worth of pay stubs from all sources of income
  • • a list of the bills you pay and for how much
  • • a months worth of receipts for variable spending on such things as groceries, transportation, household items, take-out, etc.

Once you have those things we can get to work on making smart money moves.

3. Calculate Your Income & Expenses

Writing down your income and expenses is a necessary step before you can create a successful budget.

Why?

Because, once you have this information in front of you, you can:

  • 1. Determine whether you’re living within or beyond your means
  • 2. See which expenses can be reduced or eliminated from your budget
  • 3. Determine where you overspend
  • 4. Find room for things like savings and debt repayment

We’ll get started with your income now:

 

Your Income:

Using the information you gathered during step two, calculate your total monthly income (after taxes) from all sources.

Monthly Income Template From The Budget Boss Binder™

 

For the purposes of this post, let’s pretend our total monthly income is $5,000.

 

Your Expenses:

Next, you’ll want to calculate your total monthly expenses.
 
For the purposes of most budgets, it’s helpful to break your expenses down into two categories:
 
  • 1. Fixed Expenses: Bills that you pay monthly, usually for the same amount and on the same date. (Rent/mortgage, utilities, cell phone, credit card minimums, insurance, etc)
  • 2. Variable Expenses:  Costs that vary in price each month and could be decreased or eliminated if needed.  (Groceries, transportation, entertainment, personal spending, etc.)
Monthly Expenses Template From The Budget Boss Binder™
If you aren’t sure what your monthly variable expenses are, begin tracking your spending in a budget binder to calculate an average at the end of the month.

 

For the purposes of this post, let’s pretend our total monthly expenses are $3,500.

 

Financial Evaluation:

Now that you have you total monthly income and total monthly expenses calculated, you can do some simple math to see if you’re living within or beyond your means.

Simply take your total monthly expenses and subtract that number from your total monthly income.

For example:

$5,000 (total income) – $3,500 (total expenses) = $1,500

Financial Evaluation Template From The Budget Boss Binder™

 

If the number is a positive number, you’re in the green.

You should be able to afford your lifestyle with ease each month.  If you’re scratching your head right now wondering where all your extra cash has been going, then starting a budget is the best thing you can do for your finances.

If the number you calculated is a negative number, you’re in the red.

You cannot afford your current lifestyle and are spending more money than you earn.  Decreasing your expenses will be key to starting a successful budget.

But wait:

Everybody can benefit from decreasing their expenses, so don’t skip the next step even if you’re in the green!

4. Decrease Your Expenses

Now:

I know what folks in the green are wondering, “why should I decrease my expenses if I’m making more than I’m spending?”

Well, more money in your pocket is always, unanimously a good idea, right?

Decreasing your expenses will make sure that you’re not wasting money on stupid stuff and will free up money for the good stuff.  The important stuff. (Like vacations, duh!)
 
So:
 
To decrease your expenses, follow these 3 steps:
 
  • 1.  Take out your list of expenses and mark each one with a star that you think you could eliminate or decrease.
  •  
  • For instance, could you find a company that offers internet at a lower cost?  Are you overpaying for car insurance?  Maybe you could refinance your mortgage or student loans for lower interest rates. Could you carpool and decrease your transportation costs?  Are you spending waaayy too much money on coffee at Starbucks each month?
  •  
  • You get the point!  Do the research and you’ll be ah-freaking-mazed at how much money you could be saving.
  •  
  • 2.  Sign Up For Truebill
  •  
  • When you sign up for Truebill, they’ll securely connect to your bank account(s) to analyze your spending, subscriptions, and recurring bill pay.  Then, Truebill will work its magic by helping you cancel unused subscriptions, negotiate lower bill prices, and improve your credit score.  In the last five years alone, Truebill has helped its users save over ONE HUNDRED MILLION DOLLARS!
  •  
  • You can sign up for Truebill here and be saving money in minutes!
  •  
  • 3.  Pay Off Your Debt
  •  
  • Credit card debt, car loans, and student loans will suck you dry every month if you don’t work hard now to pay off what you owe.  My two best recommendations for paying off debt quickly are to consolidate your debt into a low-interest personal loan or use the debt snowball method to pay off your debt.
  •  
  • Doing this will save you hundreds – if not thousands – of dollars over the course of your life.
 
Now, I’m gonna be real:
 
If you only do one thing after reading this post, let it be to decrease your expenses.
 
It is by far the simplest thing you can do to free up extra money in your life.
 

5. Choose A Budgeting Method

Yay! You made it!

It’s time to get down to business.  Budgeting business 😉

To create a successful budget, you need to decide which method will work best for YOU and YOUR lifestyle.

These are the 5 beginner friendly budgeting methods that I recommend exploring:

 

Budget By Paycheck:

Budgeting by paycheck is BY FAR the easiest method and is perfect for people new to budgeting.

In a nutshell,  budgeting by paycheck is the process of using a calendar to track your paydays and bill due dates so that you can easily manage the money you are earning and spending.

Free Budget By Paycheck Calendar

 

By using a calendar you can clearly see how much money you need each pay cycle to afford your bills and spending.  You can also determine how much you have remaining to put towards savings or debt.

For the complete guide to setting up a paycheck budget, click here!

 

Zero Based Budget:

A zero based budget is the concept of spending and/or allocating 100% of your income each pay cycle.

So, for instance, each time you are paid, you will pay the bills that are due, set aside money for groceries, transportation, etc., and divvy the rest between personal spending, debt repayment, savings, and investing until there is no money left.

Free Zero Based Budget Template

 

This method is perfect for people who want to be more intentional with their money and spend each hard earned dollar wisely.

For the complete guide to zero based budgeting, click me!

 

50/30/20 Budget:

The 50/30/20 budget rule is super simple.

You’d take your income and spend 50% on needs, 30% on wants, and 20% on savings.

Because this method is restrictive, I only recommend this budget to those who aren’t living paycheck to paycheck but want to be more responsible with their money.

You can read the full guide to the 50/30/20 budget here!

 

Automated Budgeting:

 

An automated budget leaves no room for error, so money stress will become a thing of the past!

You’ll start by creating a simple budget for yourself, much like the zero based budget.  Take your income and divvy it up between expenses, debt, savings, and investing.

Then, put that ish on autopilot by setting up percentage based direct deposits to multiple bank accounts and automatic bill pay.

Free Automated Budget Checklist and Template

 

For example, you’ll directly deposit 50% into your bills account, 20% into your. spending account, 20% into your debt repayment account, and 10% into your savings account.

This way, you’ll always have exactly how much money you need for your lifestyle.

I’ll be honest:

This budgeting method seems a little intimidating and takes some time to set up, but once it is in place, you never have to budget again!

For a step by step guide to setting up your set-it-and-forget-it budget, click here!

6. Tracking Your Budget

Once you’ve chosen and set up your budget, you MUST track it.

Because, here’s the deal:

If you do not track your budget, you cannot make sure that you are sticking to your budget.  And if you aren’t making sure that you’re sticking to your budget, your budget will fail.

When you use a budget binder to track your finances, you can check off bill payments as they come and set and track your debt repayment and savings goals.

So, you might be wondering:  How do you track your budget?!

Well, we developed the Budget Boss Binder™  to track any and all budgets, debt repayment, savings goals, bill payments, and more.

The Budget Boss Binder™ is a printable and digital budgeting planner designed to help you stick to your budget, pay off debt, save money, and create an abundant life.  The templates included are un-dated so you only have to purchase once to use this them forever.

And:

Because you’re a valued reader of Who Says What, we’re offering our best selling Budget Boss Binder™ to you for 50% off when you click the button below!

SKIP TO THE BOTTOM? READ ME!

Did you skip to the bottom?  It’s cool, most of us do.  😉

To sum it up, if you want to learn how to budget your money, follow these steps:

  • 1.  Establish Your Why – Define exactly why you want to start budgeting (you want to pay down debt, save more money, or stop careless spending)
  • 2.  Gather Your Financial Information – Collect recent paystubs, a list of all the bills that you pay, and recent receipts for spending such as groceries, take out, and household items.
  • 3.  Calculate Your Income & Expenses – With the information from step two calculate your total monthly income and total monthly expenses. Then, subtract your total  expenses from your total income to see if you’re living within or beyond your means. *DO NOT SKIP THIS STEP and play guessing games; your budget will fail.*
  • 4.  Decrease Expenses – Use a service like Truebill to analyze your spending and help you decrease your expenses.  Also, pay off debt and live frugally to save money.
  • 5.  Choose A Budgeting Method – Research different budgeting methods like budgeting by paycheckzero-based budgeting, the 50/30/20 rule, and the automated budget method.  Then choose a system that works best for your lifestyle and create your budget.
  • 6.  Track Your Budget – Don’t let the time you spent creating a budget go to waste by not tracking your budget.  Invest in the Budget Boss Binder™ for all the tracking templates you need.

The bottom line?

Creating a budget is necessary for anybody who has an income and pays bills.

ARE YOU READY TO TAKE ACTION?

Now that you’ve got all the juicy details on how to budget your money for beginners, it’s time to take action:

I can’t wait for you to start affording your blessed life!

Happy budgeting!

Michelle