I bet you can think of about 6,473,920 things you’d rather do than budget. I get it. Sitting down and making a budget for the first time can be a challenge. And, the reason it’s hard is because budgeting is more than just numbers on a page.
Think about it. It’s relatively simple to list your income and expenses in neat little rows. What’s hard is facing the reality of not being where you want to be financially, not having as much income as you want, and realizing how much you’ve spent on coffee in the past (or maybe that last one is just me? #momlife.) Suffice to say, I’ve been there.
The good news is budgeting gets easier over time. It usually takes about 3-4 months to get the hang of it. It might take even longer to get your spouse on board, and that’s OK. What’s important is that you make the effort to track your spending and set financial goals using your budget as a guide. OneMain even has a handy online budget calculator tool you can use for this purpose.
Here’s how to create a budget for the first time:
Step 1: Know Your Exact Income
You might have an idea of how much money you make, but when you budget, you need to know exactly how much money is coming in every month. Then, you should know exactly how much you have left to spend after taxes, healthcare expenses, Social Security and more.
Some people work 9-to-5 jobs where their employer automatically deducts those expenses from their paycheck, which makes it easier to budget. Other people work in jobs where they receive tips or own their own businesses. That means they have to set aside money from their paycheck themselves if they expect to owe taxes or if they have to pay for their own health care. Once you figure this out and know the exact number you have to work with, you can move on to the next step.
Step 2: List Your Expenses
Many people know when their bills are due, but they might not realize some of their sneakier expenses, like subscription services. They might also be surprised to find (as I was) just how much money they spend on groceries and eating out every month.
I’ve been budgeting for years, and I still have to keep a close eye on my grocery budget every single month. Because it’s so easy to go over budget in that category, I try to be as mindful as possible when I go shopping for food. I’ve also added a line item for takeout in my budget knowing that some nights, I’m simply not in the mood to cook dinner.
As you look at your expenses, find some you can cut out. Then, decide which ones you can’t live without (for me, it’s my gym membership). Make sure your income covers all of the expenses you want to keep with room to spare. If it doesn’t, you’ll have to cut some more expenses or find ways to make extra money.
Step 3: Get a Month Ahead
Some people budget paycheck to paycheck, but I don’t. Instead, I budget one month ahead. This means that when the first of the month rolls around, I have the entire amount I need for the month already in my checking account. And, because I have the full amount I need for the month, I have all my bills set to auto-pay.
If you can, do your best to start budget planning one month ahead too. When you get a month ahead, you don’t have to wait for payday before sending in your car payment. You don’t have to anxiously count down the days until you’re paid again. You already have everything you need for the month right there on the first day. It’s a great feeling; I highly recommend it!
Give yourself a month or two to slowly get one month ahead. Have a garage sale, sell an old computer or start a side hustle. Put any extra money you make in a separate account as a buffer to slowly move you to the prized one-month-ahead status. Once you get there, monitor your spending on a daily or weekly basis to ensure you’re mindful about your spending and expenses.
Lastly, Be Mindful
Once you get the hang of budgeting, you’ll soon realize that budgeting isn’t so bad after all. Instead of feeling as though your budget restricts you, you’ll soon realize your budget gives you permission to spend where it matters most. And, don’t beat yourself up if you forgot to cancel a subscription or had a huge unexpected expense. Budgeting isn’t about being perfect; it’s simply about being mindful.
Catherine Alford is compensated by OneMain.
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