How to set a Budget
Get ConnectedHow to Set a budget
Get ConnectedDoes the idea of money management fill you with anxiety?
Have you tried to set a budget before, but struggled to keep up with it? Financial discipline is important, but knowing where to start can be confusing and discouraging.
Here at in , we want you to experience more freedom from the stress of your finances. We know that how Jesus teaches about money brings more joy and peace than any budget, and we’d want you to experience that.
Here are practical steps to setting up a budget – and getting more freedom and peace in your life:
Step #1: Determine Your Income
You have to have a clear idea of how much money is coming in every month. The first step of budgeting is to determine your total or net income, including your salary, wages, bonuses, social security, and any other sources of income. Make sure that you calculate your income post-tax so that you aren’t blind sided by how much money is actually coming into your account.
Step #2: Determine Your Current Spending
Ever wondered “where did all my money go this month? You need to know where money goes. Start with your most recent months bank and credit card statements and make a list of all your regular expenses and bills, the ones that have to be paid every month.
- Rent or mortgage payments
- Utilities (gas, water, electricity, internet, phone, trash, etc.)
- Grocery bills
- Car payments
- Tuition
- Gas
- Insurance (car, health, homeowners or renters, etc.)
- Tithing
You probably have some expenses that change every month, or aren’t a bill, like:
- Clothes or shopping
- Dining out
- Entertainment (going to the movies, bowling, etc)
Step #3: Categorize Your Expenses
Your budget is made up of buckets of “types” of expenses, with each bucket given a designated amount of money for the month. Go through your expenses list and divide your expenses into categories such as housing, transportation, food, and entertainment. It is important to note which categories are mostly fixed expenses and which categories are mostly variable expenses.
Along with the expected categories, like housing, groceries, and entertainment, we recommend two additional categories that can make or break your financial planning.
Emergency Fund
We believe that Jesus wants a life for you with more joy and less stress. Unplanned expenses can leave us stressed and anxious if we’re not prepared. An emergency fund allows you to cover inevitable surprises without worry or without going into debt. Start with saving $1,000, then work towards a few months of expenses.
Savings
Are you hoping to buy a car, go on a vacation, or purchase a home? Having a savings account (or having a certain amount of your income allotted to savings) can help you achieve those savings goals! Financial experts recommend putting 20% of your monthly income into savings, if possible.
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Step #4: Create a Plan
After you’ve categorized your expenses and have an idea what you’re spending each month, assign each bucket/category an amount for month. Make sure that you allocate the full amount of money to pay your essential categories, like housing costs, utilities, and groceries first, before allocating money to non-essential categories, like shopping.
Financial experts recommend that you save 20%, spend 50% on essentials like food, housing, or insurance, and spend no more than 30% on “wants”. See if your current spending matches up with this. If not, see where you need to cut back or change your spending.
Step #5: Monitor Your Progress and Stick To Your Budget
Track your spending each month to see if you are staying within your budget. Review your budget if necessary to better align with your goals.
A budget isn’t the law and shouldn’t control every dollar that goes in and out of your wallet. But sticking to your budget requires discipline and commitment, and can help you achieve financial stability and security in the long run.
Helpful Tools For Setting a Budget
Don’t start budgeting blind. Here are some useful tools that can help you manage your money and monthly expenses.
Budgeting Apps like Mint or GoodBudget
Apps like Mint or Goodbudget connect to your bank accounts and can help you set categories for your expenses. Apps like this can help automate some of your budgeting and can send you notifications when you spend money outside your budget.
A Money Management Course Like Financial Peace University
Sometimes it can help to have someone to walk alongside you with financial planning. Find an online course to get money management training from an expert!
A Spreadsheet Template for Excel or Google Sheets
You can create a spreadsheet to track your expenses, or you can use one of the many free budgeting spreadsheet templates available online!
Here at , we want to equip you with the tools for lifelong stewardship and wisdom over your financial resources.
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