Building a Budget 101
The key to budgeting is knowing what you have to spend each month (your fixed costs), what you ‘want’ to spend (your variable costs) each month. And, of course, how much money you have to spend! Colibri Life can help you know these three things in four simple steps…
Step 1: Make a list of the bills you pay every month and try to figure out your average expense for each for a month. You can usually find this on your bank’s website (if you pay bills online) or by looking at your checkbook or credit card statements. If you pay for things with cash, try to keep a record of everything you spend for a month. Apps can be a very helpful way to keep track of your cash spending.
As you make your list, check for the following common expenses:
- Transportation Costs
- Utilities (gas, electric, water, trash removal)
- Internet, TV, phone
- Travel, vacation
- Food (groceries, restaurants)
- Health Insurance
- Auto, property, casualty insurance
- School supplies, field trips
- Entertainment (movies, bowling)
- School Loans
Step 2: Once you have your list, mark each item as a ‘have to spend’ or a ‘want to spend’.
- Groceries would be a ‘have to spend’ as you have to eat and feed your family.
- Eating out would be a ‘want to spend’.
- Heating bill, electric bill, water bill…all are ‘have to spend’ items.
- Coffee, cable bills…depending on your life needs, these may be a ‘have to’ or a ‘want to’ (yes, some of us must have our morning coffee & our Game of Thrones fix!)
Now cut your monthly expense on three of your ‘want to have’ items in half. Instant savings!
Step 3: List out all of your monthly incomes (the money coming in). These may include your paycheck, alimony, child support…any money coming in during the month.
Step 4: Total your monthly expenses, total your monthly incomes and subtract your expenses from your income.
- If your Income minus your expenses is a positive number –
Great job! You are spending less money then you are earning and you have a little wiggle room to start to put away money for a rainy day. Keep tracking your expenses on a monthly basis and watch your savings grow. For even more growth or some help achieving your financial goals, reach out to one of Colibri Life’s Financial Advisor specialists for support.
- If your income minus your expenses is a negative number –
Don’t worry! There are lots of great tricks to help you save money. Subscribe to our Life Lessons newsletter for bi-weekly tips and visit our Life Lines area for our Budgeting 201 lesson coming soon!
Congratulations! You have just completed your budget.
Now make sure you use tools to track your spending (there are some great apps out there that you can leverage – Goodbudget is one of our favorites these days) and check in with your budget on a monthly basis. Just know where you are spending your money on a monthly basis is a HUGE accomplishment!