TAKING THE FIRST STEPS TO CREATE YOUR PERSONAL BUDGET
You’ve made it this far so you must be curious how we went about designing our monthly budget that took us from debt to debt freedom.
Don’t yawn, it truly can be a fun experience especially when you see your savings grow and your debt vanish.
In creating our 10-step monthly budgeting series our aim was to keep it simple and brief so not to overwhelm even the first-time budgeting folks.
We’ve poured a little bit of our experience into every series post from 1 to 10 and we hope that you too can benefit from the perks a budget offers your mind, body and soul not to mention your bank account.
First things first, get organized.
You know all those bills you have in a shoe box or in the “junk drawer” it’s time to fish out those paper critters and get organizing.
Some of the steps we took to get organized in preparing our first monthly budget are fairly simple. The best part is the more you do it the better you get at keeping papers under control so you know where everything is at all times.
Think- Everything has a place.
Related: The KonMari Method of Organization
Gathering All The Budgeting Information
- Locating all bills including credit cards! Anyone you owe money to including the mortgage/rent.
- Organizing bills into piles by date ie: Rogers, Union Gas, Hydro, Reliance or finding data from logging into the respective websites
- Make a list of dates and cost of each bill in an excel document
- Make a list of dates bills typically need to be paid by but this may vary.
- Make note of interest rates if you are not paying bills off in full. If you don’t know get on the blower and find out!
- Make note of the cost of each bill whether it was variable or fixed
It was imperative to ensure we had all the information at our finger tips so we could accurately design a budget for our needs.
It’s important to remember that every nickle counts so you don’t want to forget anything even if you think it’s negligible.
If there is a certain bill you cannot locate call the company and ask for assistance or if you have online access that may be a time saver for you. We have automated all of our bills now and can view all accounts online which makes keeping organized a cinch.
Related: Debt Repayment Plan – Free Printable
Create a List of Bill Payments
We then made a list of everything we knew we would have to pay for each year for example,
- Dog licence
- Stickers for vehicles
- Krown application on vehicle
- Tax prep
I think you catch my drift, if you know you are going to pay for it, save for it in advance. You will learn more about that in the projected expenses part of this budgeting series.
I know you can’t possibly think of everything so keeping a miscellaneous section in your budget is key.
Once you have all your debts, variable ie: grocery, miscellaneous, pet, transportation and fixed expenses ie: mortgage,taxes, insurance etc you can start to put your budget together.
Another important point to remember is using your net income not your gross income. Some people may believe your gross income is the golden ticket but its your net income that puts a roof over your head and food on the table.
Net Income = What you take home at the end of the day once all deductions are paid (taxes, expenses etc.) Essentially it is the amount deposited into your bank account from your employer. (Note: If you are self-employed you need to know what your net and gross figures are)
If you have any other income sources these figures are also important to factor in but to me if they are variable then I don’t count them as fixed income more as variable income as it can fluctuate.
It’s not something I personally would design my budget around. It’s nice to have at the end of the month and more for your savings but by all means you can count them in if you know the income is consistent but variable.
If you have to design your budget around a variable income try to collect 6 months of income and do an avg income to base it on. Unless someone has another suggestion I’m not too familiar with this type of income.
Related: How to budget with irregular income
Document, Document, Document everything!
You have done plenty of work today, take a deep breath, pat yourself on the back and know that these steps will make an impact on your financial health and future. Your present income and savings is just as important as your future retirement savings.
Your next step in the Budgeting series > Step 2 Designing Our Budget
Discussion Question: What were the first steps in designing your budget?