How to Use the Budgeting Sheet

Howdy!

I’ve written a step-by-step on how you can use the budgeting template I created to make a budget that works for you.

Selfishly I’ve written this up for the free course. SO! I’m counting on you to read through this, use the template, and let me know what I missed or what wasn’t clear.

Your response will help others get out of debt!

First, it’s important to know, there are lots of types of budgets out there:

Pay Yourself First - When you get paid you invest 30% and just do whatever with the rest. This is the lightest version of a budget, I don’t recommend if you have debt.

50:30:20 or 60:20:20 - These are frameworks for how much to allocate toward needs, wants and savings. 50% (60%) toward needs, 30% (20%) wants, 20% investments.

Zero-Based Budget - Assign a job for every dollar you make. If you’re getting out of debt - I’d recommend using a zero-based budget, it’s going to be the most effective for getting rid of that debt.

You may start budgeting one way, and eventually pivot to budgeting a different way. For now, let’s talk about building a Zero-Based Budget.

Let’s Make a Budget

The first thing you’re going to do is audit your current income/spending:

1. Gather credit card & bank statements from the last month - If you were to use a budgeting app and pay for their premium version, you can skip this part since they should have all your transactions pulled.

2. Open up the Budgeting Template - I’m writing this as though you’re using the spreadsheet but you could use an app like Monarch, YNAB, EveryDollar, etc

3. Income Remaining - Enter the income you had remaining when you started the month. this way we can account for every dollar.

4. Tracking Transactions - One by one, enter each transaction (including income) into the Monthly Expense Tracker. There are basic details that you can use to categorize each transaction. Be honest when you decide if it’s a Need or Want. If you can’t be honest with yourself, who can you be honest with? This is the most boring step, but a very critical one.

5. Analyze/ Audit - Use the filtering tools to look at what you’ve been spending on Wants. Where can you get better? When looking at Needs, are there ways to lower the cost of certain bills like being smarter about grocery shopping, auto paying bills or shopping around for insurance? This is something you should really spend time thinking about.

6. Show Yourself Some Grace - You might have some terrible spending habits. That’s ok, that’s why we’re making a budget. You might be behind on how much you need to be making. That’s ok, that’s why we’re making a budget.

Now it’s time to make a plan (Toggle to Budget Breakdown):

1. Income - Write in all of the expected income you have this upcoming month.

2. Budget Needs - Filter your expenses down to Needs and add each of those items and amounts to your Budget Breakdown.

3. Separate Your Debts - No debt should make it into your “Needs” other than your mortgage. For now, enter the minimum payments and separate each of the loans you have. So if you have 5 student loans, enter each one individually. We’ll come back to this.

4. Wants - You might not have anything left over for “Wants”. I hope you do. If you do, don’t skip over this. Sometimes we get caught up trying to budget everything toward things that will advance our financial situation. That’s like planning to go to the gym twice a day, every day. Are you really going to stick to that? Is that even good for you?

5. Actual Spending - Now you have an idea of how much you’re on the hook for each month. If you have money remaining, this is money you’re going to put directly to your debt. Keep it simple, don’t worry about investing right now. In fact, think of paying down debt as investing. If you have a negative Net Worth right now, getting rid of your debt is increasing your net worth.

6. Picking Debts - Don’t sprinkle a little bit of your amount remaining to each debt. Attack one debt at a time. I’ll talk more about this in the next lesson, but I suggest going after the smallest debt first.

Congrats, you just made a budget. Now is the hard part, actually sticking to it.

Tips For Cutting The Fat

As you audit your spending, write down the things that cause you to break your budget. Specifically focusing on Wants. What are the triggers for this spend?

When you commit to not spending on this thing, what causes you to break that commitment? If you really want to stick to a budget, it’s imperative that you figure this out.

Eating out is a common example - maybe you don’t like your cooking, maybe you’re tired when you get home. Those are the objections you need to overcome. Figure out a meal you can cook that you like. Meal prep a ton of it so you don’t have to cook when you get home.

Maybe you shop when you’re sad. Find new outlets. Recognize that when you’re sad you want to spend. Exercise, clean your house, do something that’s free that you’ll feel good about afterward.

I’m not saying this is easy, I’m just laying out that if you can connect your thoughts and behaviors you’ll be able to control your spending.