How to Prepare A Personal Budget – And What You Need To Do Next!

How did you put some dollar signs to your SMART goals?

Did you have a chance to gather your financial records and paperwork, this lesson is all about budgeting – and is the MOST IMPORTANT LESSON you’ll ever learn when it comes to money management.

Budgeting is simply an assessment of your income and your expenses and a plan that you create to manage your money – and achieve your financial goals. So your budget becomes the blueprint for your financial future.

And the simple rule of managing a household budget is that you need to earn more money than you spend so you have a positive cash flow. If you don’t and you are spending more money than you have, you will have a negative cash flow and either need to earn MORE money or spend LESS.

SIMPLE, right?

The key here is to know exactly how much money you’ve got coming in and where it all goes – so you need to be informed. Only then can you look at HOW you can manage your budget better.

How to do a budget

You’ll be using the attached Budget Worksheet

Here: budget-template.xlsx.

Complete the ACTUAL column.

STEP 1: ASSESS YOUR INCOME

The first step in preparing any personal budget is to know how much money you’ve got to start with – your income.

Income is what money comes in the door and could be from your usual job (either as a salary, or a wage), welfare payments, child payments, or returns on investments.

So what is YOUR monthly take-home income? You can get this from your paycheck stub or by adding up the deposits from your employer into your bank account.

Be careful you don’t overestimate your income if it includes penalty rates or overtime, in fact, you’re better off UNDER-estimating your income for your budget so any penalty rates or overtime become a nice little bonus!

And if you’re preparing a household budget, also include your partner’s income.

Enter it on your Budget Worksheet

STEP 2: DETERMINE YOUR EXPENSES 

This is a little harder, but it is important to be as realistic as possible when estimating your expenses. In fact, it is better to OVER-estimate your expenses for your budget so you have a nice little bonus if you don’t spend your full budget allocation for a particular expense.

Some expenses are fixed (they are more or less the same every week or month, such as insurance premiums), but others such as groceries will vary from week to week depending on what you use.

It may be worthwhile going through your credit card and bank statements for the last few months to see exactly where your money is going.

Also, don’t forget about the yearly bills such as real estate taxes/ car registration; etc. These are often big bills, but must be allowed for in your spending.

To make it easier to tally your expenses, convert all your expenses to a monthly cost. For example, if your yearly car registration bill is $600, divide this by 12 to get $50 per week (you can go a step further and divide it by 24 to get $25 per bi-weekly paycheck).

By doing this for ALL of your expenses, you will be able to see exactly how much you are spending on average every month.

Enter all of your expenses on your budget worksheet. It’s an Excel worksheet so, customize fields according to your budget.

NOW ANALYZE!

Are your monthly expenses more than your monthly income? If so, you really need to cut some costs and BUDGET.

Or are your weekly expenses less than your weekly income? In which case, where does all this extra money go?