Create a Budget that is Sustainable in 7 Simple Steps

When I first tried to create a budget I failed so badly because I had no idea what I was really doing. Everyone says “Create a budget so you can save” (or insert, get out of debt, or be financially free). But HOW? I created my categories, I created my list of bills, I created how much I was going to spend on each item. But I always over spent. Every. Single. Month.

I thought it was impossible to create a budget because how was I supposed to know how much I was going to need to spend? How was I supposed to account for bills that weren’t due that month, but I needed to have them in my budget to show I was accounting for them.

That was when I gave up on budgeting and just figured if I didn’t spend more than I had in the accounts I was good. But that isn’t controlled and when you want to work on getting out of debt you have to budget. It’s basically the number one rule from anyone giving you advice on getting out of debt.

That’s why I generated these 7 simple steps to help you create a budget that will actually be sustainable.

1) Track your spending habits

I’m a huge fan of Darren Hardy and the Compound Effect and one step he advises if you want to make a HUGE change with little steps is to make a detailed account for what you are trying to change. For example, if you want to lose weight, track all of the calories you eat. If you want to create a budget, track all of your spending habits! You only have to do this once! Not only will you see where your money is going but you’ll see how much you are spending that you don’t even realize on insignificant items! Count the dollar you give to the cute kid selling lemonade on your street. Put that $0.50 gum ball purchase in your book. Track anything and everything that has to do with spending money.

Once you’ve gathered your data you can categorize it and figure out how much you need for each category once you create your budget.

2) Create a budget by starting with where you are at

Starting is the hardest part about creating a budget. For me I wanted to wait until the start of the month, or the next paycheck, or once I had time to figure everything out. (If you don’t have time right now when are you going to have time?!). So start right where you’re at. Whether you are in the beginning of the month, the middle, or end. Or whether it is Wednesday and you don’t get paid for another 1.5 weeks. Start where you are at. Right. Now.

3) Plan for the necessities first

There are so many areas to think about when creating a budget. Bills, debt, food, housing, charities, savings, etc. For me, the most essential necessities are

1. Paying my tithing (charity)
2. Saving (10% of my gross income gets moved every paycheck into my savings account. I don’t even have to think about it anymore)
3. Food (I always worry about going hungry…What? I like food!)
4. Mortgage
5. Bills
6. Debt

Now that I am working towards paying off my current debts and growing my wealth I will be adding retirement and investments into my budget.

Items I buy in bulk so I can keep track of how much my big grocery week is going to be

4) Be realistic as you create a budget

If you are only planning for $100 a month for food you are not being realistic. For me food was the most difficult area because I am not very good at meal planning. (I don’t like cooking). So my husband and I would go shopping based on what we felt we needed at the time and oftentimes would wander the store and go “Oh yeah! We need this, too!” That inevitably led to overspending because we didn’t plan for it. So then we transitioned to “Well, we’ll have to get it next week because it wasn’t on the list…but better add it right now because otherwise we’ll forget.” So we got better at spending. But then we’d just have to go shopping during the middle of the week when we realized…yeah…we really DID need that item sooner than our next shopping trip.

When I did finally create my budget I based food on one shopping trip that represented a pretty average trip. (See step 1 about tracking your spending!) We buy a lot in bulk (I have a great spreadsheet for figuring out what we buy in bulk and the average cost so when we know we’re going to need that item we can plan for it in our budget for the next month) so most of our trips were the perishables. Our budget for food would adapt as our bulk needs changed. (See next step)

5) Be Flexible when you create a budget

Biggest mistake I made when I first created a budget was that I wasn’t flexible. I figured every month was the same. But no two months are alike. Whether it’s celebrations, vacations, holidays, or simply the rotation of your bills, each month is unique and needs to be addressed individually.

Areas to be flexible in:

• Food – bulk items run out at different rates and you don’t always need the same things every month
• Bills – bills are on different rotations. There are yearly, quarterly, bi-monthly, or monthly bills that need to be accounted for each month. What I failed at the first time was assuming we could “balance” the difference. So if my trash bill was due bi-monthly I tried to halve the amount as my monthly budget. This didn’t work because it looked like I was overspending on one month and underspending on another month. This also didn’t work because I was counting on future money I didn’t even have yet to be accounted for in a bill!
• Debt – each situation is different with debt. Some emergencies happen that are going to cause you to use your normal “snowball money” to make sure you stay out of debt, while other months you are going to find you have more money coming in that you can put towards debt. For example, my husband gets two bonuses from his work so two months out of the year he is getting more money those months. He also is going to school so tuition costs come up every quarter. So one in three months I have to budget for tuition instead of putting that money towards debt.
• Savings – much like with debt certain circumstances change how much you can put (or keep) in savings each month. I like to put 10% in savings each paycheck, however, I also understand that some months are tighter than others so I might have to hold off on that savings account. Some financial experts will tell you not to save while you have debt, while others will offer recommendations on how much to save while paying off debt. Ultimately, the choice is yours and you have to do what is best for your family.
• Personal entertainment – I believe it is essential to have some “fun money”. As much as I admire some of the people that can go go go without spending on themselves, it is not something I can do that is sustainable. I add a personal expense in my budget and one for my husband. I don’t want to feel like I’m on a deserted island. However, I also understand that some months we just might not be able to do this.

Areas to not be flexible in

• Charity – again, this is an area that is personal, but for me I will always pay a 10% tithe as the first thing that comes out of my paycheck. It will always be 10% so I am not flexible in this area when creating a budget.
• Bills/mortgage or rent – in my opinion it is essential to stay caught up on your bills that are essential to living. Mortgage/rent keep a roof over your head, pretty essential in my book. Electricity, water, and gas are all essential to me. Now bills that might fall under categories of unessential might include cable, internet (though my husband wouldn’t agree with me on this one), phone, etc. you might be able to live without for a month or two if you need to cancel/shut them down.

My July 2019 Budget

6) Create a budget by writing it down

I am a big fan of planning a budget, but until you write it down (or type it out) your chances of sticking to your budget drop dramatically.

Write down or type out your budget.

There are too many tools online (apps, websites, excel spreadsheets), or printable material to NOT do this. You can make it as easy as you’d like (you may have a little less control over certain aspects if you use someone else’s work) or as difficult as you’d like (more control because you create what works for you). There are no excuses to not follow this step. Something about actually writing out your budget increases your chances of actually sticking to one.

Which leads to the next step:

Actual Budget spent

7) Stick to your budget

This might seem the most obvious, but it’s amazing how many people don’t actually follow the budget they create for themselves (I was one of those people!). By making your budget realistic you are more likely to stick to it. In addition to creating my budget I also created a second sheet that shows what I ACTUALLY spend.  This will allow you to REALLY know where your money is going and where you need to be flexible for the next month.

Summary

To summarize here are the steps:

1. Track your spending habits
2. Start where you’re at right now
3. Plan for the necessities
4. Be realistic
5. Be Flexible
6. Write it down
7. Stick to it

What about you? Are there any steps you would add to create a budget? Or are there any steps you find you struggle with the most?