How to Create a Budget And Why It Is Crucial To Do So

Although I thoroughly enjoy blogging, it is, at the moment, just something that I do on the side in whatever spare time I can muster together. I’m a marketing manager by day—I manage traditional and digital marketing efforts for two dealerships. I also manage a significant marketing budget for each dealership each month.

I must admit that I have never been the type of person who was known for managing money well. In fact, a little voice in my head told me that maybe I should reveal this little, probably significant, detail to my employers before taking on the position. You know, so that they could make a well-informed decision and all.

Okay, so I’m exaggerating a little—I’m not that bad with money. However, it did take some time and some meticulous effort on my part, but I eventually got the hang of managing such massive budgets. Then one day it occurred to me, I was doing a pretty decent job managing a marketing budget for two dealerships but a lousy job managing my personal budget. What was that about?

Regrettably, the importance of saving money and adhering to a strict budget did not catch on for me in the early years, despite the repetitious urging of my dear old dad who would insist that I start saving for a rainy day. Why, oh why didn’t I heed my father’s loving warnings? Well, better to start late than never at all, I suppose.

I realized that if I wanted to start blogging and eventually turn it into a business, it was crucial that I got my personal expenses together first. If not, there was no way that I would be able to efficiently juggle both my personal expenses and that of my business. So how did I get started?

create a budget

 

Have the Correct Mindset

Well, I knew that if I wanted to be successful at creating and sticking to a budget, I needed to have the proper mindset. You see, when you manage a budget for someone’s business, you must report to a boss. However, when managing your personal budget, the possibility of becoming lax and not giving your full meticulous effort is there because you are not answering to a boss. You are answering to yourself, and we tend to be lenient with ourselves.

I would need to treat my budget the same way that I would a business. I had to be strict on myself. After all, I was my own boss in this scenario, which meant there was some accountability—to myself.

 

Know Exactly What You Spend

I would log onto my online banking account and see what I spent my money on, and I would do this on a regular basis. I thought I was staying on top of my spending by doing this. However, it always felt like I was spending more than I should but I could never figure out why.

Let me tell you; there is nothing like having all of your expenses written out in black and white to give you a full understanding of exactly what you’re spending. I redrafted the spreadsheet that I used for the dealerships and made one specifically for my personal expenses. I made a section for my savings, a section for my monthly expenses, a section for my debt, a section for my business (this blog), and a section for miscellaneous spend.

Then, for that first month, I went through each transaction in my bank statement and put each charge in its appropriate section. I was amazed at how much I was actually spending each month. What bothered me the most was the fact that I was paying about $1 a month on a recurring membership to learn Spanish, which I only used the first month and completely forgot about the membership immediately afterward.

I was throwing away $1 a month. But, I do that. I shamefully admit that this isn’t the first time a recurring charge got the best of me.

Cut Costs

Once I had the sums of each section all written out, I was able to see what areas I needed to cut back on precisely. As a result, I set spending limits for myself in each section and started cutting some unnecessary expenses. For example, I was paying nearly $100 a month for my cell phone service with a mainstream company. After doing some research, I later switched to a smaller phone company and am now paying $55 a month for my cell phone service.

Set Realistic Payment Plans

After I was able to cut out some unnecessary costs, I started to focus on paying off my debt. Before I could do that, I wanted to make sure that my necessary monthly expenses were covered. This included setting up a high yield savings account. So I searched for a bank that would pay a monthly interest.

As soon as my monthly expenses were all accounted for, I decided to allocate a certain amount that I could spend towards my business each month. Then I set up personal plans to pay off my debts.

Be Consistent

The months that followed, I made sure that I logged each time I spent money and on what. At the end of the month, I would cross reference with my bank statements. At the end of each month, after I paid myself, my expenses and so on, whatever extra money I had left over would go towards my debt in efforts to pay them off quicker.

As long as I stayed within the budgets that I set for myself, I was all right. Each month I allocated a certain amount for dining out and shopping, etc. So I never felt deprived of doing the things that I wanted to do, I just knew that there was a limit in which I needed to adhere.

Setting up a budget was one of the best things that I ever did for myself. I no longer feel like I’m living from check to check and I’ve adopted smarter spending habits. What about you? Have you created a budget? How has it helped you? Let us know in the comments below. Also, download my free Excel budget template below.

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Author: Geneva

  • Great tips! Lord knows I need them lol! I pretend I’m being proactive by checking my bank statements but everytime I see a charge where I can’t even remember what I bought I brush it off (I know it’s terrible). I’ll definitely have to start writing it down and tracking my spending daily like you said.

    • Feel free to download my free budget template in Excel file. It’s a great way to get started! 🙂

  • It is crucial for people to get a grip on their spending. This is great advice! We have an annual budget that is broken down into months – the best part is the FUN money allotments. My husband and I both get a specific amount of $$ at the start of the year that we can use for whatever our hearts desire. Him-GOLF, Me-Home Decorating and Concerts!

    • That’s awesome, Lisa! I love that. I think people need to definitely make room for fun money allotments or else they would hate budgeting. 🙂

  • I feel so organized and on top of things when I budget and stick to it. It’s always my goal, but consistency and the time to do it are where I get bogged down. Thanks for the motivation!

    • It’s definitely a great feeling to be on top of your budget. Because I’m always so busy, being consistent has been a struggle for me too, Lauren. I’m happy that this post gave you a little motivation. 🙂

  • Hits way close to home, especially during tax season it makes you so much mor concious of it. Little things here and there add up! One big expense he and my husband cut out is going out so much! When we were younger it was an every weekend kind of thing. Now, we don’t even have the desire to do much. Lol. We just want to be with our cats!

    • Hahaha! Oh Crissy, I’m so the same way. I can watch an Amazon movie and hang out with my cat and that would be a great night in for me, cheaper too!

  • Thank you for these great tips! It is so important to know where your money is going. We started by carry around a little notebook to write it all up as we spent. There is always little expenses not on the budget and no one knows where the money went.

    • That’s so smart, Rolene! I have been using the notes app on my smartphone to jot down every time I spend. Those little expenses are truly the culprits especially because they are so easily forgotten.

  • It’s definitely difficult to create a budget, especially a realistic one. I’ve cut my daily coffees by making them at home and saving the coffee shop expenses for client meetings. Even the little things help!

  • Hi Geneva,

    It’s a wonderful post full of little things one must keep in mind while doing the spending! Usually, I make unrealistic spending plans so, I shall take a few tips from your post to increase my personal savings!

    • I’m happy to hear that you plan on using a few of these tips Ambuj. I really hope it helps you. 🙂

  • I’m glad that you talked about having the right mindset. If we don’t really want to change, we won’t. We need to have the mindset of getting out of debt and staying out of debt NO MATTER WHAT, otherwise we fall back into the same bad habits.

    • Yes, I’m glad you agree Sheila. Having the right mindset or determination is definitely needed.

  • I’ve come to realise that the budget and saving mindset is less present in the societies where the access to credit is very easy. In fact, where you find people with poorly paid jobs that can access 3, 4, 5 or more different credit cards, you are enabling people to spend more than they have.
    This could be good, but it could be also terrible.
    I grew up in a rather poor country, with a special political circumstance at that time (30 years ago) where credit did not exist. We also had poor economic situation. In a way that marked us forever in our mentalities and our way to use money!

    • Yes, that is a constant trap for many people. It is very easy to get caught up in spending money you don’t have on credit cards when you lack a decent income to cover your living expenses. It’s sad really.

  • I am fortunate that I have a natural tendency to be very frugal (I am a big fan of thrift shopping!) and I’m also a big saver. I don’t believe in spending money I don’t have, so I always save up for a while before making any kind of big purchase. It takes the stress out of my finances 🙂

    Gennifer Rose | http://www.GenniferRose.com

  • Having a handle in a monthly budget is very important and even more so when you are self employed. I’m switchingbgears this year and need to be vigilant with spending.

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