No one likes feeling like they don't have control over their money. Having an overwhelming amount of debt or feeling uncertain about how much money is going in and out of your bank account is not a good feeling.
When you create a budget worksheet and list your monthly expenses and income, you can see all of those numbers all at once. You probably have an idea of how much you're spending but haven't taken the extra steps to get exact numbers. It's time to get your budget on.
A budget is simply a detailed breakdown of how much you're spending relative to what you're earning. It can be an eye-opener (you spent $500 in Ubers this month?!) but more importantly, it helps you:
Learn how to apply the magic of a worksheet with your finances so you can put a plan into motion. Pay off some lingering credit card debt, save for your dream vacation or maybe even buy a house.
The way you lay out your budget really depends on preference, but it's a good idea to use the worksheet as a baseline to list everything out. Creating an accurate, personalized budget template will provide you with an answer to the question, “Can I afford it?"
The following steps can help you fill out your budget worksheet. Use your financial statements, such as credit card bills, utility bills and pay stubs. Hopefully, you have this information easily accessible online.
Add up your expenses, subtract it by your after-tax total income for the month and you should have a good idea of how much money is left over (or how much is not left over).
Write down all of your after-tax income for the month. If you work at a company, this might be a set number each month.
If you're an independent contractor, this may vary from month to month, depending on your projects. Use your best judgment to estimate how much you think you'll earn on average each month, or simply take the last three months and average those out.
Your income also includes any alimony or child support you receive.
There are two types of expenses for each month. The first is called your fixed expenses. These include:
Next, write down your variable expenses, which may fluctuate each month, including:
Once you have a general idea of how much you're earning and spending, think about what goals you want to accomplish with your money. These should fall into both the short and long-term categories.
For example, a short-term goal can be to pay off credit card debt or fund a short trip in the summer. A longer term goal can be to save for a house or pay off a large student loan.
If you don't yet have a specific goal in mind, start putting some money aside each month into your savings account. Consider moving a set amount of money each month into your savings account from your checking automatically, so you don't even see the money hit your checking account.
Pro budget tip: It's recommended that you save about 10 percent of your after-tax income into your savings account or emergency fund. You should have about six months to a year's worth of living expenses put away in an emergency fund.
A budget worksheet can put your financial plan in motion, but checking up on your spending each week is important. Mint or Personal Capital are handy online tools that allow you to aggregate all of your financial accounts (such as credit card balances, checking and savings accounts) in one place.
If you find you're veering off track one month or had to overspend due to an unforeseen event, be sure to make adjustments the following month in your variable spending so you can save more.
The following is a budget worksheet template you can use to implement the steps listed above. Of course, you can revise it to fit your needs, but this should get you started.
Knowing your financial situation in detail will help you understand what moves you need to make. Do you need to save 10 percent more in your IRA or 401k this year? Should you focus on building your emergency fund? Can you lessen discretionary spending?
You'll get a true picture of your personal cash flow, which will allow you to make better financial decisions. Gain control of your expenses, pay off your debt and aim to save more money.
Claire Tak is a writer who previously served as head of content and chief editor for FinTech companies in New York and San Francisco. Her work has appeared on FOX Business, Bloomberg and Forbes. She writes regularly about travel, money and being a good human. Traveling and snowboarding are her two favorite things to do.