5 Steps to Your Best Budget

How many of you have a budget? How many update your budget frequently when situations change?

I know that I reassess my budget anytime my life changes. New jobs, new expenses and moving; these all warrant a change in your budget.

If you have never been too serious about your budget, it’s time to start!This is what can make or break your financial future.

Basic Steps of Budgeting

1. Determine your fixed expenses.
2. Estimate your variable expenses
3. Include your safety cushion
4. Sneak in your goals
5. Reassess your budget often

Get a notebook or open up a spreadsheet to brainstorm and keep track of these numbers.

Determine Out Your Fixed Expenses

Fixed expenses are things that will not be different in the next month unless you change your situation somehow.

Fixed expenses include:

• Rent/mortgage
• Car payment
• Auto insurance
• Life insurance
• Health insurance
• Child care costs
• Cell phone

Estimate your Variable Expenses

Your variable expenses are those that can change from month to month. These are the ones that you open the bill like your either going to win the lottery or go bankrupt.

Variable expenses include:

• Utilities (unless you use a fixed plan)
• Groceries
• Gas and vehicle maintenance

Save for a Rainy Day

Everyone has that unexpected expense that pops up at the worst time possible. For example, my clutch went out last week, which cost me $1660 and a week of not working because I couldn’t get there. If I didn’t have a hefty savings account at the time, it would have been a lot worse.

All the experts say that you need to have about 3-6 months of expenses put away as an emergency fund. I think 4 times your expenses is perfect for me. But, before you decide on an amount, think about the things that could easily go wrong. Picture your worst case scenario.

Now, put about 10% to 15% of your income into that emergency fund every month. This is a part of your budget  and should not be spent on anything. I know its tempting to spend when have been eyeballing something for a while and can afford it now. Think of that money as nonexistent if it helps. I know I don’t even think about having that money until I need it for an emergency.

Work Your Goals Into Your Budget

Make a list of the goals you have. Include things like retirement age, vacations, Christmas/birthday presents, etc. Set a date for these goals to determine how much you should be putting away each month towards that goal.

If you want to go on vacation next summer, do some research; Figure out how much that vacation is going to cost you. Think about travel, lodging, food, attractions, etc. Once you figure that out, divide the amount by the months you have to go until the vacation.

For me, I want to go to Bali, Indonesia in August of 2016. I’ve estimated costs of $5000 and 18 months to save. This means, I need to save $278 every month.

Also, don’t forget that this amount is separate from your emergency stash savings amount.

Reassess Your Budget Often

Reassessing your budget is actually very important. If you change anything in your life, it is probably going to change your expenses. Even something like getting a new job where you make more money can be important.

If you have a specific budget you are following, you may get that better paying job and assume you can spend all your extra money on whatever you like. The problem is, you may have to drive further or at a different time to work. This could change your gas expense or even child care expenses if the time difference is significant.

I quickly go over my budget every month to review it, even if nothing has changed. This gives me an opportunity to see if there’s any ways I can save that month. It also just keeps me accountable. Anytime I move, which I seem to do often, I redo the whole budget from scratch.

Budgeting is actually as simple as writing down your income, expenses, and goals, and sticking to them!