How to Create a Budget
Written by Rayne Fisher-Quann on August 26, 2017
One of the most integral parts of any person's life is their budget. Whether you're in middle school, university, or retired, you will always need to have a well-formulated and balanced budget. Luckily for you, creating a budget is one of the easiest aspects of personal finance! Here???s everything you need to know to get your finances in check.
Method One: Using a Spreadsheet
1. Determine income and expenses
The first and most basic step to any budget is figuring out where your money comes from and how much of it you have. For most teenagers, your main source of income will be your job or your parents (probably both). In your spreadsheet, create a section called Income and add categories beneath it - Job, Parents, or wherever else you get your money.
The next part, which is a little harder, is nailing down all the places where your money goes. This can be general - categories like food, clothing, other - or you can get more in depth by listing your most common stores and restaurants. I find that doing the latter can actually help you save money, because once you see exactly how much you're spending at Starbucks, you're a little less inclined to buy that $5 frappe. That's what's so great about a budget - you often don't even know where your money is going until you write it down. One of the biggest shocks of my life was when I made my first budget and realized that I had spent over $1000 on coffee in that year alone!
A budget's purpose is not only tracking your expenses, but planning ahead and setting limits for your spending. The way to do this is with expected values. Create a column on your spreadsheet labelled Expected. This is where you'll put your expected income and your spending limits.
The income part is easy - using your hourly pay, allowance rate, or whatever else, calculate how much money you expect to make for the month. Fill in your values under the right rows.
Expenditures is a little harder. This is where you have to think critically about where your money is going, and allocate funds for every aspect of your life. Say your income is $1100 per month, and you want to add half to your savings each month - this leaves you with $550 to spend per month. It's up to you to allocate that between all of your expense categories. Here's a quick example I made in google sheets:
As you can see, it's pretty basic stuff - but the impact it can have on your finances is incredible.
Filling in your actual values
This is the hardest part of budgeting. Yes, writing down the cost of every burger you eat and movie you see is annoying, but it's the most important part of your budget and you won't regret it in the end. This is where small actions like saving your receipts and looking for sales come in handy! Writing down your expenses will make you much more aware of where your money goes and it's a great motivator to save. Here is, again, a quick mock-up of what your finished budget might look like.
Method 2: Using an App
This is the more modern - and easier - method of budgeting. There are a plethora of options available, so here are a few of my favourite budgeting apps.
Mint is one of those amazing all-in-one apps that can help you with the majority of your finance needs. Mint sets up a beautiful, colour-coordinated budget, manages your bill payments, and even checks your credit score. This comes along with a clean-cut and easy-to-use layout, and additional features like account alerts and 256-bit encryption.
BUDGT is another innovative app with unique features. Its claim to fame is day-by-day budgeting - it tells you exactly what you can afford to spend in a single day, so you never go over budget. You can also set reminders, export your data into a spreadsheet, and more. You can also tell BUDGT which days you want to spend the most with its innovative dayweight feature.
Spendee markets itself as The most intuitive finance app ever. It connects directly to your bank account and tracks deposits and expenses as they happen - no inputting information required. It also has easy to read and aesthetically pleasing graphs that show you exactly where your money goes. It also shows you your money map - the locations where you spend the most money - and supports all currencies for travelling abroad.
And there you have it! Everything you need to know to keep your spending in check. Use the apps, or make a spreadsheet - but most importantly, start budgeting today!