How To Write a Budget {and actually USE it!}

How to Write a Budget {and actually USE it!} from Our Cozy Den

Ah, yes… dreaded B word: Budget. People think of a budget and they cringe. Budgets are restrictive. No fun. Too hard.

Well, I tend to disagree. When done properly, budgets give you an immense sense of freedom!

Before we had a written budget each month, I would feel so guilty about every penny I spent that I didn’t feel was vital to the family. Every time I bought myself a book, a shirt, or lunch out with my friends… I felt plagued with feelings like “We can’t afford this.” or “I shouldn’t be spending this money.” Once we had a written plan in place, it was all suddenly okay. I knew that the money I was spending was set aside for that purpose and the weight was lifted!

So where do I start?
1. Research.

How to Write a Budget {and actually USE it!} from Our Cozy Den

First you’re going to have to do some research. Print out four copies of the budget starter spreadsheet. {Find the link at the bottom of the page}  Later, you’ll be keeping it on the computer (stay tuned to see why) — but for now, you’ll want copies printed out.

The first 2 copies are for you to fill in the past 2 months’ expenses. This might hurt a little bit… log in to your online bank, and fill in the budget with what you ACTUALLY spent in each category. This is your jumping off point to see where to start with your number allocation.

The second two copies are for step 2: the budget meeting.

2. The Budget Meeting.

How to Write a Budget {and actually USE it!} from Our Cozy Den

Next you’re going to sit down with your spouse, if you have one. If you don’t have a spouse, find an accountability partner. This needs to be somebody level-headed and financially-savvy. Someone who will tell you straight up where things need to change, but not be a crazy stickler either!

Each of you take a look at the last 2 months’ expenses (from step 1), and fill out what your ideal budget would be right now. This is not your ideal for the future — when you have the credit cards paid off and have figured out how to cut your grocery bill in half. This is the ideal for right now, something you can implement right away.

Once you each have your budgets written down, compare the numbers. Where are yours  high and theirs low? And vice versa? Some categories will not change (like your mortgage — it is what it is), but others will have a lot of wiggle room (eating out, clothing, etc.). Discuss your needs and meet in the middle.

3. Zero is the bottom line.

How to Write a Budget {and actually USE it!} from Our Cozy Den

Now it’s time to create a zero-based budget. What that means is that you start with your income, and you keep subtracting expenses until you get to zero. Every dollar of your paycheck is allocated somewhere.

This is where I like to do my figuring on the computer. I know people love Excel — and I’ve had half a dozen people tell me to use it over the years — but I’m a Microsoft Word girl. I love the clean look, the neat margins, and the easy-to-manipulate tables. I type in all of my categories, and use the table AutoSum feature to do the adding for me!

4. Make bills automatic.

How to Write a Budget {and actually USE it!} from Our Cozy Den

Automatic payments really help lessen my workload! Every time it is an option (which is pretty much everywhere nowadays), I opt for this feature. I note the withdrawal date on my budget sheet, so I know when to expect it.

5. Schedule a weekly update.

How to Write a Budget {and actually USE it!} from Our Cozy Den

I love to set alarms in my phone. I do my budget updates on Sunday evenings. When the alarm goes off, I log into my online bank. I check to see which expenses have come out, and take note of that on my budget sheet. At the beginning of the month (or whenever we get paid), I write down on a sticky note all of my cash categories and amounts. Then I swing by an ATM and pull out the cash for my envelopes, and note that on my budget sheet as well. (I wrote a TON about my envelope system, and WHY it’s the best way to go in this post here!)

6. Plan to Reevaluate.

How to Write a Budget {and actually USE it!} from Our Cozy Den

A budget is a fluid thing. Expenses change. Things come up. Things cost more than you anticipated. You figure out how to lower costs in other areas.

In the beginning, you’ll want to have a budget meeting every month. Look at last month’s budget, see where you had an excess or deficit. Re-crunch the numbers and start over for next month. After 4-5 months, you can start meeting every 2 or 3 months, as you get a better handle on things.

 

How I Make This Work For Us

-Big life changes like a new job, a move, a new baby, a home purchase — all of those require a complete overhaul from scratch.

-Every year we have a “looking forward” meeting, to see if we are meeting our big life goals, like saving for retirement.

See it in action:

Here’s a step-by-step look at our actual budget from last October, so you can see how my updates look throughout the month!

How to Write a Budget {and actually USE it!} from Our Cozy Den
At the beginning of the month we have a clean slate: the categories, dates, & budgeted amount is filled out. Everything else is blank so far. AutoSum confirms that my budgeted expenses are equal to my expected income.
How to Write a Budget {and actually USE it!} from Our Cozy Den
Next, I fill in the ACTUAL amount of this month’s bills. Most of them do not change from month-to-month, but some do. If I don’t know what it is yet, I leave it blank until I know.
How to Write a Budget {and actually USE it!} from Our Cozy Den
As I do my weekly check ins, I see what has cleared my bank account. I mark the balance as 0 if the actual amount = the budgeted amount. If it is over or under, I put the difference. I mark it with a checkmark to denote it is done!
How to Write a Budget {and actually USE it!} from Our Cozy Den
Another update as the month progresses: more bills clear, more checkmarks. I also put the date at the bottom with each update, so I know how far back I need to go in my checking account for the next update.
How to Write a Budget {and actually USE it!} from Our Cozy Den
And finally, the end of the month: I use AutoSum to double check my numbers. Everything adds up. This particular month I was $17 under budget (but actually $108 under what we were paid), and the surplus gets transferred to savings.

 

I worked on making an editable Budget Starter Spreadsheet for you guys — it looks very similar to mine, but I added a lot more categories because I know most people have expenses we do not have. And in the beginning, it’s better to have a little more detail… you can streamline later!

It’s a Microsoft Word document, so you can open it in Word, and add or delete rows to make it fit your needs. I recommend making a Master Budget Spreadsheet, then each month copy the master into a new document for that month’s report.

{Click here to download my editable Budget Spreadsheet!}

Thanks for stopping by, and I hope you guys find it useful!! Try not to be intimidated — it really does get easier the more you use it!

 

Check out THIS PAGE for more posts about Budgeting & Taxes!

How to Write a Budget {and actually USE it!} from Our Cozy Den
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