We’re helping you create your budget with a 7 step process. Our goal is to make this as simple and actionable as possible! It doesn’t have to be complicated. We can help. In the last step, we focused on income. Today, it’s all about expenses.
Before we move on, please note that if you want help with us, we can absolutely help you get started. Financial coaching is a great way to get a second opinion and get the momentum you need to start great financial habits! You can find out all about it during a free 30-minute call.
After you see how much money you make, it’s time to list expenses.
88 | Make Your Budget With Us: Our 7 Step Process To Create A Zero-Based Budget – Part 2 Breaking Down Expenses: Needs vs Wants, Bills, Personal Spending & More – Financial Coaching for Women: How To Budget, Manage Money, Pay Off Debt, Save Money, Paycheck Plans
1. List out all debt payments
You’ll start with debt payments. One time we did a client’s budget and did all of the expenses first instead of the debt payments. That was a disaster! Debt payments must come first because they are non-negotiable. You must pay them. And once you list those out, you’ll know what is left to budget. Remember debt is any money you owe to any person for any reason.
Here are some examples of debt payments:
- Credit cards
- Car payments
- Student loans
- Personal loans
2. List Expenses
Next list your bills out. These are things that are invoiced & come out in roughly the same amount each month. Review past account statements to make sure you get them all.
After you make a list, you can go back and note which are needs and which are wants. This doesn’t mean you have to change anything right away, it just gives you something to consider. Needs are things that you must have and we call that the 4 Walls:
- Food (groceries, not restaturants)
- Shelter (mortgage)
- Utilities (water, electricity)
- Transportation (gas, insurance)
Wants are things that can be important but, if you lost your job tomorrow, you might reconsider. For example:
- Cell Phone (this could be a need but it’s not a NEED to have the newest cell phone with the largest data plan, right?)
Pro Tip: Separate your bills from your expenses to make tracking & spending much easier.
4. Expenses are discretionary (you choose the amount)
Expenses are all the discretionary spending like groceries, gas, spending money, etc. The trick is to write down what you’re spending first, then LATER try and reduce it.
Spending money is also non-negotiable or you WILL end up stealing it from another budget category. Having a specific spending money set aside will make you feel like you have so much money!
If you can, create two accounts: one for bills and one for expenses. Separating your bills from your expenses will make tracking & spending much easier.
5: Setting Up Savings Buckets
Savings buckets are big ticket items you want to set aside money so that your monthly budget doesn’t have to cover it by themselves. Examples:
- Car maintenance
- Pet care
- Gifts / vacations
- Home repairs
- HOA fees
- Insurance premiums
Your savings buckets will be based on your life, your goals and what you value.
You don’t have to start with all of these, or even any of them right off the bat. It is important eventually to get serious about them. It’s a lot of adulting, sure. But you can do it! 😉
6. Get to zero
Every month will have something special come up whether it’s a item needed for a child at school or a new tool to repair the faucet or even pitching in to the office baby shower gift fund. That’s okay! You’re going to be ready because you are PLANNING ahead and you know your numbers
After you’ve paid debt, bills, expenses and any minor monthly things, you may be at zero. You may also be negative. You need to reduce your outgoing, increase your income or both.
Once you have some margin, you can set monthly goals. First, you’ll want to set aside your $1,000 emergency fund. Next, pay off your debt small to large. Finally, start investing, savings for college or paying off your mortgage!
That’s it, you completed step 2! You should be so proud of yourself, you’re on a roll. This is not that complicated and you ARE that smart. You’ve got this!
If you want any help, please don’t hesitate to reach out to us, book a free 30 minute call with us! We will get you some quick wins!
Book Your Free Call Now!
We are excited to create the time & space to talk to you about your current money situation. This is a free, no-obligation call where we can answer questions you may have and maybe find some quick wins for your budget.
What do you have to lose?