By Eric on February 8, 2012 18

How to Make a Budget for the First Time

We have been budgeting for three years now. It’s not a long time in the grand scheme of things, but long enough to know that the first one is harder than all the rest combined. It’s challenging to account for everything that will happen between paychecks. Life is full of surprises, and it’s better to have a plan of attack than to let them run you over.

How to make a budget for the first time

I’m not a budgeting expert, and I don’t have a super complex formula to squeeze millions of dollars from your paycheck. But, we do have three years of experience that we will share with you to get you started on a budget.

How to Make a Budget for the First Time

  1. Gather all of your financial data. The main point of budgeting is to get a handle on all of the expenses that you have in a month, and to make a plan for every single dollar before you get it in your bank account. This might require that you go through your bank statement to figure out how much each bill costs, when it is due and to get a rough estimate for how much you spend in each category (housing, gas, food, entertainment, clothing, toiletries, etc.).
  2. Start with an open mind. Attitude is everything. We were an emotional wreck when we sat down to do our first budget. We didn’t get it, and it was frustrating. Keep your chin up. It gets better. After the first one, the rest are pretty simple.
  3. Use the tool that works best for you. We tried to do our first budget on paper. It was horrible. There was so much eraser dust. We quickly found comfort in an electronic budget spreadsheet template made by our mentors in our Financial Peace University class, which we now available when you sign up for our newsletter. This changed budgeting for us forever! We love it. You may not. A written plan might work better for you. Find what works best and run with it. Here’s a look at the spreadsheet we use:Free Budget Spreadsheet
  4. Allow yourself enough time. It took us about four hours the first time. Again, we didn’t have the best tool at that time, but don’t sell yourself short. This is something you will be using for a long time. Give it the time it deserves. Don’t try to cram it into a 20-minute window you have.

How to Keep a Budget Going

  1. Review it often. We look at our budget almost daily. This might make you cringe, but we don’t keep a checkbook register. We’re all digital, baby! This is why having the right tool is so important. It must be easy for you to access and easy to change and reference.
  2. Record every transaction. The amounts we enter on our budget are estimates (except for some bills that are the same every month). At least once weekly we compare our budget spreadsheet with our online banking service to make sure we didn’t miss anything and to record the final amounts that were paid. You might choose to keep your receipts until they are logged into the spreadsheet. We bold the final amount once it is paid so we can tell at a glance how we’re doing.
  3. Get an accountability partner. Every situation is different, but hopefully your spouse is on board if you have one. If you don’t, ask a trusted friend to help you stay on track with the important financial decisions. I would not be able to stay on track if it weren’t for Kelsey keeping me honest, and vice versa.
  4. Plan ahead. On the budget spreadsheet we use, there is a category called blow. This is a catch-all or padding. Because we have gotten better and better at anticipating expenses (which comes with experience), we only allow $20 per paycheck in that category. Each month we look ahead at what we have planned (gas for travel, dinners out with friends, etc.) and budget accordingly. This is key to making your budget as close to accurate as possible. We have to make adjustments on the fly, but they are usually minimal.

Other Tips

  1. Set up budget billing. We have budget billing for our gas, electric and water bills. They take a 12-month total and we pay the average of that for the following year. This takes a lot of fluctuation out of our monthly bills. These bills adjust slightly every year depending on usage, but the peace of mind it brings us is awesome!
  2. Set up automatic payments. We were hesitant to do this at first, but it’s so easy to do, and we don’t have to worry about remembering to pay our bills and what day they are due. This is especially helpful now that we have electronic statements for most of our bills.
  3. Note when bills need to be paid on your budget. On our budget spreadsheet, we note next to the mortgage category that the bill isbudget due on the 1st. Next to our water bill, we note the date it’s due as well (20). This helps us plan which paycheck that budget item will have to come out of, since we get paid every two weeks and not on the same day every month.
  4. Use cash. We use cash for two categories: food and hair care (the two things we tip for). We know people who use cash for more items, but this works for us. We have an envelope for each cash category. You may want to use cash for more or less; the point is that you take control of your spending habits and only spend what you have written/typed on your budget. Going over your budget means you spent more than you made.

What frustrates you most about budgeting? What tips do you have for others?

 

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Eric

Husband to Kelsey. Father to Rooney. Follower of Jesus. Born and raised in Iowa. I like blogging. Bulleted lists excite me. Thanks for stopping by.

  1. Great post. I’m going to give a great big shout out to Mint.com. It has been the BEST (free!!) tool for us in helping us budget. Check out the progress we made in helping our budget for the month of January here: http://barbersareblessed.blogspot.com/2012/02/31-days-of-nothing-recap.html

    Thanks for all of your financial tips. I love them!

    • Mint.com was super helpful to gather all of our finances in one place. What we found (and this was 3 years ago) was that it was very practical for showing us what we spent, but didn’t really help us to establish a budget. We maybe didn’t utilize it to it’s full potential, but the spreadsheet works for us.

  2. The thing that frustrates me about budgeting is the constant maintenance. My husband and I have found it’s easier to upload our spreadsheets into my g-mail account and then share it with him so we can access it anywhere. We have an expense tracking spreadsheet in g-mail, too. It helps!

  3. Thanks so much for the tips! My fiance and I recently moved in together and were looking for a good way to manage our finances — we’ll have to give this a shot! Luckily our spending can’t get too out-of-hand living in a tiny ghost town :)

  4. thank you both SO MUCH for this! you have no idea how badly i needed to see and hear this. :) my boyfriend and i know nothing about finances, and especially given that i’m graduating in april and we’ll be almost like big boys and girls, we really need to try and make a budget. my dad explained is to me early last month, but i love the spreadsheet. :)

  5. i actually don’t think budgeting is frustrating at all! …in fact, it’s quite the opposite.

    i think at first it was more scary than anything, because things didn’t line up,…and more was going out than was coming in. ( ahhh!!! ) after about 3 months or so ( for me! ) things started to click. and now, about 3 years later ( just like you guys! ) — i couldn’t imagine managing money any other way.

    budgets rule!

    in our house, we use flowing pennies.
    http://www.clarkwood.com/flowingpennies/
    …it’s really just a digital check register, almost. super simple >> and works for us.
    [ i’ve been considering mint.com for years though. syncing info between devices is enticing… ]

    : )

    • I fell in love with budgeting when I realized it didn’t mean that we had to stop spending money. Like you said, it’s just a way to make sure we don’t overspend (which we were), and now I don’t feel guilty for spending money that we’ve rationally decided to spend. It’s very freeing, even for a free spirit like me :)

  6. my advice for everyone would be to just stick with it! the budget should work for you, not make you crazy. keep tweaking and changing until it’s a document that fits your style.

    for couples budgeting together, i would suggest an “allowance” for each of you. it doesn’t have to be much, but it’s your individual money that can be spent how ever you please and can’t be called in to question by your partner. this also satisfies the divide between spender and saver. my husband always spends his allowance, whereas i hoard mine for weeks and then make a larger purchase. but i can’t nag him for buying coffee and comic books because it’s HIS money!

  7. We set up automatic payment for everything possible. SO much easier. We have a spreadsheet in Excel for our budget, which shows how much is left over after savings and fixed expenses. There is just no way I can track every penny each month. I’ve tried to do that, but it absolutely wears me out. We set up what I call budget “guard rails.” We save a certain amount of money from each pay check, pay our bills, and whatever is left over can be spent however we choose.

  8. Love excel spreadsheets!

  9. We sit down and create a budget at the beginning of each month (now we do this so often it takes no time at all) because often our expenses fluctuate and we need to make adjustments. This means that we both know the exact state of our finances.

    We also treat our savings like the rest of our bills; something that needs to be paid and is a non negotiable.

  10. I absolutely LOVE budgeting. I find it so personally rewarding. My husband cares for it less than I do, so I generally take the reins as far as handling the spreadsheet goes but we definitely consult on what is important enough to make the budget (other than our monthly bills, obviously). I really don’t find anything frustrating about it. In fact, I find it to be the complete opposite – I am much (much much much) calmer about spending money when I have spend a bit of time reviewing the budget for that week. The only thing I’m not good at as far as money is concerned is cash. I’ve found that it is much easier for me to spend $1 here or a $5 there when I have cash on hand. I am very unlikely to whip out my debit card to pay for a pack of gum. So, instead of cash, I’ve started using to the cash flow app on my iphone for our “flex spending” category. From what I can tell it works similarly to your “blow” category. It catches our random ice-cream runs, redbox rentals, the occasional coffee run and things of the sort. The app has been terrific for helping us keep track of those little purchases that you might otherwise forget about. I just set the budget amount in the app on payday and deduct those little purchases as the week goes on.

  11. I have been wanting to get on a budget for a long time, but I can’t seem to get my husband onboard, which is funny because I’m the one who is more careless with money. Any suggestions on how to get him to start and stick to a budget?

    • Hi Shannon, Great question. This is a very common issue with married couples (we went through it too!) It took us over-spending one month by a few thousand dollars to wake us both up. Approach is everything in this situation. Your husband likely feels threatened that you are wanting to control everything, or doesn’t see the need for a budget. I would start with a dream meeting, where you sit down and talk about what your financial life would look like 20-30-40 years from now. Then start talking about what it would take to turn those dreams into goals, and action steps you need to take today to start moving in that direction.

      The first few months of budgeting are the hardest, but so worth it in the end. Let me know if you need any help!

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