Are you tired of debt and having that weight on your shoulders? Do you want financial freedom and not owe anything to anybody? One of the first places to start is to create a monthly written budget. In this article I share an easy step by step approach to creating a budget. If you are interested in learning the steps we took to pay off $70,000 in 2 years then continue reading […]
HOW TO CREATE A BUDGET
- Calculate your monthly take home pay. This is after taxes and retirement contributions. If your monthly income varies take an average over a 3-6 month period. I would error on the side of under-estimating your monthly take home pay if needed.
- Write out ALL of your monthly expenses. For example, mortgage/rent, phone, cable/internet, gas, groceries, non-consumables, ect.
$150 car insurance
$150 phone bill
$600 grocery ($150 per week)
$100 centerpointe energy
$300 gym memberships/extra-curriculars
$2,500 savings minimum ***
Expenses Total = $6,825.00
You can see that since there is no debt a monthly savings minimum should be included as a part of the budget. I would suggest at least 30-40% of your after tax and retirement contribution take-home pay.
If you aren’t sure how much to budget for groceries each month calculate how much you spend each week. We consider anything you eat to be grocery. This includes coffee, fast food, ect. Save your receipts for an entire typical week and start there.
The supply category includes anything you can’t eat such as diapers, shampoo, stamps, sports equipment, ect.
3. Subtract your monthly expenses from your take home pay. This is what you have left to put towards debt, invest, save, ect. If you don’t have anything left then you have an income problem, expense problem, or a combination of both.
FINAL TIP: Pay with cash for any groceries and supplies especially as you pay down debt. Pain centers of your brain are activated when you use physical cash over swiping a card.
Happy Financial Planning FitFam!! With Gratitude, Andrea Jean