How to Create a Budget

Not everyone has a budget and you certainly might have worked very well without one prior to now, but being aware and making a cash flow plan is a fantastic tool for helping you chart a path forward!

Step one: Lay it all out there

If you haven’t had any conversations about money in your past, now is a great time to start. Sure, it may feel uncomfortable initially, but it will continue to get easier if you’re open-minded, transparent, honest about your own spending, and committed to building goals you want to achieve together.

I recommend finding an hour or so to sit down together as a couple to talk about your various sources of income, your typical expenses, your retirement contributions, and any investments you may have.

If you already use a budget (or budgeting app – we suggest: You Need A Budget or Mint), then you likely already know your expense categories and have a decent idea of what you’re spending every month. However, if you aren’t quite sure, I recommend printing out your bank and credit card statements from the past 3-6 months and taking a look yourself. Try to be as realistic as possible when calculating your expenses. There’s no sense in planning a budget that doesn’t accurately reflect your spending. Instead, take an average of your spending over 3-6 “normal” (aka: non-holiday/travel months) and assess where you are. Try to do the same thing for your income if you find that your income also is highly variable.

Some budget categories you may want to include/think about:

  • Rent/mortgage
  • Gas
  • Utilities (i.e. cable, internet, water, garbage collection, snow removal, etc.)
  • Grocery spending
  • Dining out
  • Transportation (i.e. parking and ride-sharing services)
  • Automobile expenses
  • Mobile phone
  • Student Loans (or any other monthly loans)
  • Credit card debt payments
  • Toiletries (aka trips to Target/Amazon)
  • Childcare
  • Hobbies (i.e. fantasy football, golf, salon visits, facials, etc.)
  • Travel
Made it to Banff after years of planning!

Step two: Decide how you want to budget going forward

There is no “perfect” method or tool for budgeting…except the one you’re willing to stick with. For some couples, using an app is the easiest way to go. For others, using an Excel spreadsheet or physical notebook to track expenses is more than effective. Bottom line: choose the one you think will work best for your situation and then commit to it.

Step three: Build your budget together

Take some time to list out your combined after-tax income and your collective expenses. Note, this doesn’t mean you HAVE to share everything equally. It may make sense for one person to cover groceries and the other to cover any dining out expenses, for instance. It all depends on how you want to divvy things up. However, keep in mind that to go anywhere TOGETHER, you’ll want to be on the same page and at least tracking these things as a couple. Therefore, take a few minutes to write down every single expense category you may routinely have (borrowing from the list above to get you started) and write down how much those things typically cost you OR how much you’re comfortable spending.

For example, some things might be routine, fixed expenses that don’t change each month (such as your rent or mortgage, utilities, or phone bill) but others might vary (such as trips to coffee shops, entertainment, hobbies, etc.). Decide together how much you’d be willing to spend on each category and write this down.

*Note, as a rough “ballpark guideline”, it can make sense to try to follow the 50/30/20 budgeting method to guide your spending. Essentially, try to keep your routine, fixed costs to 50% (or less) of your monthly after-tax income, 30% to the fun “wants” (things you could do without if you had to), and then aim for 20% or so to go towards your future savings/investments/travel goals.

Step four: Check in each month and track your progress

At the beginning of each new month, schedule a “money date” with your partner and see how you actually did with your previous month’s spending. I recommend doing this while sitting down to go over your monthly (or weekly!) calendars. Were you “on budget” or did spending go over/under your goals? Were there any eye-opening moments or categories that you definitely need to adjust? It is important to use this time constructively (as opposed to placing blame or pointing any fingers) and make adjustments to your goals for next month. After a few months of doing this together (and it does take anywhere from 8-12 weeks to feel like you’re getting the hang of this), we’re willing to bet you’ll feel more in control of your money (instead of the other way around).

A few other tips:

-If you’re a visual person, it may help you to print out your budget or create a visual for your fridge (or other highly visible location). This way, if you see yourself making progress towards your savings goals or know your expenses like the back of your hand, you may find it an easier way to stay on track.

-Things happen. Life can get complicated. If you find you have a bad week or two or seem to “fall off the wagon”, don’t lose hope. The important thing is that you get yourself back on track after taking some time to figure out what truly went awry.

– Utlizie tools to help you budget such as You Need A Budget or Intuit’s

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