For the uninitiated, setting up a budget can seem overwhelming. Where to even start? Do you use an app, a spreadsheet or a pen and paper? Do you budget daily, weekly or monthly? What are the categories you should use? You have to organize your budget correctly to make it work — how do you begin?
Luckily, there are people like me out there who live to organize budgets. Spreadsheets are actually fun for me. I’m well versed in the budgeting app world. And I regularly tweak my own budget to make sure it’s working for my lifestyle. After all, what good is a budget if it’s not operating at peak efficiency for your money?
What an Organized Budget Looks Like
A truly organized budget covers all the areas you spend in. For me, clothing is something I buy once a year. So I put that category in just one month’s budget. I don’t own a home, so property taxes are nowhere to be seen in my annual budget. Personalize your budget to get the best results from it.
Go over the last three months of spending and include a budget line (under the appropriate section!) for everything you spent. This will give you your broad view of how you spend money.
Now, you might not spend money every single month on everything you list. So what we want to do is figure out what your fixed monthly costs are and how much they are, what your variable monthly costs are and how to organize them, and what your once-in-a-while costs are.
How to Organize Your Budget
Not all budgets are created equal. Since personal finance is personal first and foremost, your budget won’t look like anyone else’s.
The first thing to do is to choose your preferred method of budgeting. If you want to use an app, we recommend Mint. If you want to use a spreadsheet or a notebook, those are also great options. I use a spreadsheet in Google Docs to track my business expenses and Mint to track my personal ones.
Once you have your medium, it’s time to start filling in the blanks. Start by organizing sections of your budget. Not all your costs will fall into the same categories. You have fixed and variable expenses, monthly and biannual expenses.
Some sections you might want to use are:
- Personal Care
- Home Costs
Once you have these large sections carved out, you get to break them down into more specific categories. This is my favorite part! It’s where the “personal” in personal finance comes into play.
Let’s start with your fixed monthly costs. These are the expenses that are the same month to month. They might include rent, insurance, car payments and child care.
Let’s take Home Costs to start. For me, that means these specific categories:
- Utilities (Electric, Water and Trash)
- Hulu Subscription
Transportation might look like this:
All of these are costs I pay each month. I know how much they will be, and I can plug that number into my budget each month.
Once you’ve identified the sections, plug in the exact numbers. You’ve got yourself a basic budget template!
Organizing Variable Costs
To organize those costs that fluctuate each month, you have to look backward a little bit.
First, add them to your budget lines just like you did with your fixed costs, under the appropriate section. Variable costs you have might be your utilities, groceries or clothing.
Second, look back over your last three months of spending. Find the average of your spending in each of your variable cost areas. You can use that number to find your budget line for each cost.
For example, if from January to March you spent an average of $150 a month on clothes, you would use that as your new fixed cost for clothing. Now you have a number you can stick to that is realistic for your spending habits.
Random Expenses Don’t Have to Bomb Your Budget
I pay my car insurance twice a year. That means I don’t have a monthly line item in my budget for it. It makes an appearance only in June and December.
Don’t let your biannual expenses bomb your budget. Stay organized by sitting down at the end of each month to plan next month’s budget. When months come around that have an added expense, add that in under its respective section. These might include your car insurance payment or your kids’ summer camp. With the new cost accounted for, you’ll be prepared for it.
Your budget is just that — yours. You want to be as clear and organized as possible. That way you can maximize how your money works for you. Don’t be afraid to tweak as you go along. Budgets are always changing, and that’s OK! I like to think of it as a fun game to try to find the best ways to use my money.
How do you currently budget?