FREE SET YOUR FIRST SUCCESSFUL BUDGET WORKBOOK

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1 FREE SET YOUR FIRST SUCCESSFUL BUDGET WORKBOOK

2 A Little About Liz: I'll have the wine! Hey there! That's me, Liz. And I created this workbook to help you get started with budgeting. I know first hand what a difference budgeting can make in your life. Budgeting allowed me to cover the rent when my roommates moved out and I had to cover the entire rent before a new roommate could move in, and then 6 months later, becoming completely credit card debt free, all because I'd figured out how to budget. In case you hadn't figured it out yet, I run Less Debt, More Wine where I help you balance massive student debt and having a life. I'm super pumped to have you as part of the LDMW gang. I hope this workbook helps you to start successfully budgeting so you can kick debt in the face faster and spend more time enjoying your life.

3 Disclosure: This resource contains some affiliate links for your convenience. When you make a purchase after clicking an affiliate link, I will earn a small commission at no additional cost to you. I am disclosing this in accordance with the Federal Trade Commission s 16 CFR part 255. I only recommend products that I personally use and genuinely recommend. Disclaimer: The following information has been prepared for general informational purposes only. The information presented is not legal advice, is not to be acted on as such, may not be current, and is subject to change without notice.

4 What Is A Budget? Budget Basics If you are going to learn how to budget, it helps to know what is a budget. By definition, a budget is an estimate of income and expenditures for a set period of time. Notice there is nothing in the definition about depriving yourself of things that are important to you. The only time it might feel like a budget is depriving you of what you want is if you have a habit of living beyond your means, i.e., spending more than you make. In which case, yes the adjustment to living within your means may not be the most fun and at times may feel like you are depriving yourself. But it is all a matter of perspective and attitude. Even if it does lead to a little deprivation, it will give you back so much more. A budget is going to help you figure out where all your money is disappearing to and start focusing on your financial priorities. It is going to help you achieve your financial goals, get out the paycheck to paycheck cycle, be prepared for emergencies, and basically set you on a path to becoming a personal finance boss, yup all you have to do is learn how to budget. The 3 Premises of Budgeting There are a few basic rules when it comes to successful budgeting and they are mentioned over and over again on personal finance blogs and websites everywhere. Except I noticed when I was first learning how to budget that they were mentioned but not always explained. So today I'm going to explain just what all these budget basic rules mean when applied to your finances. 1. Spend Less than You Earn This seems pretty basic, but it is the first step to successful budgeting and success in your finances in general. A mistake a lot of people make when starting to budget is that they start assigning amounts to different categories, based on their expenses. Then they add it all up and realize the budgeted amount is more than their income, there in lies the problem and the cause of their financial woes.

5 Start with knowing exactly how much you earn. Down to the penny. What actually gets put in your bank account? After taxes, deductions for health insurance, retirement and anything else. Start assigning amounts to the absolutely essential expenses you know you will incur (housing, food, transportation). After each amount subtract it from your income. Once you hit zero, stop. You can't afford anything else. Hopefully, this will cover all of the essentials and the only thing you're giving up are things considered non-essentials aka wants". If your income doesn't cover your essentials- you need to start cutting back on those expenses, is there a cheaper apartment you can move into, or can you refinance your mortgage for a lower payment each month? Can you walk to places instead of wasting gas driving? Are you using coupons to shop for food, is there a cheaper grocery store you can go to? Alternatively or in addition to cutting back, you can hustle to make more money. Get a second job on the weekends, or look for one-off gigs on sites like craigslist. Sell stuff you don't use anymore. Do anything you can (anything legal) to bring in some extra income. Keep cutting back and hustling until your expenses are no longer greater than your income. 2. Pay Yourself First Every time I would see this, I'd be like what are they talking about, the money goes into MY account, aren't I paying myself first already? No. What this really means is pay your goals first. You are obviously going to budget out the amount you need for the essentials, but you are hopefully also budgeting what you need to accomplish whatever financial goal you have. It could be to save an emergency fund or paying off your credit card. Whatever your goal is, make it the first thing you do with your money. Know how much you are going to put towards it and once the deposit hits, make that payment, before you pay the rest of your bills, before you do anything else. That money goes straight towards that, pay your goal first.

6 The flip side of pay yourself first - pay yourself last. What a lot of people do and what I've been guilty of in the past is committing to put all of my "extra money"/ what's left over after paying all my bills towards that goal. The thing is, other expenses would always pop up and cut into that "extra money" amount and I would never end up putting enough money towards my goal to accomplish it in time. If you wait to pay yourself last, you won't be paying yourself nearly as much. Make yourself a priority and pay yourself first. 3. Pay a Month Ahead/ Have a Buffer If you are just learning to budget, a likely motivation to do so is that you are living paycheck to paycheck and want to get out of that vicious cycle. You see the rule that you need to budget a month ahead and probably think that if you could do that you wouldn't be in this position in the first place. The thing to remember is that this can mean a few different things depending on how you like to handle your money. Some take this to mean that all of the money they spend in January, they made in December and all the money they make in January is to be spent in February so that they are always a month ahead. If anything happens they aren't screwed because they are ahead of the paycheck to paycheck cycle. I'll be honest, I don't do this, not entirely anyway. I pay all my bills a month ahead, so I paid all of my January bills with my December income. However, my everyday spending is from the current month I'm in, so my grocery shopping money for January is from January. I feel comfortable doing this because, I also have an emergency fund that will pad the blow, should anything happen so that I don't slip back into the paycheck to paycheck cycle.

7 Set Your First Budget How to Budget It doesn't matter what budgeting tool you use, whether it is a good ole fashioned spreadsheet, Mint, YNAB, or some other tool. In order to build a successful budget that you will actually stick to, you will have to go through each of the following steps. Now the order in which you go through them may vary, but this is the order that I recommend. Here is how to budget: Step 1: Evaluate 1-3 months of expenses and categorize each transaction By taking a look at how you spend your money, you are more likely to set yourself up for success. You may find you are spending way more in a category than you thought, so in building a budget that will work for you, you have to take that into account. The closer you can get to using your actual numbers, the more realistic you can be when setting your budget.if you are consistent, and you track your money you'll be able to see not only how far you've come, but you'll be able to make better spending decisions. Tracking your money is key to successful budgeting. Just looking at your income and then budgeting it isn't going to work unless you have an idea about how much you actually spend in each category. Lots of people "budget" their paycheck, but the ones that actually succeed with their budgets are tracking their spending to ensure they stay on budget throughout the month. They don't just wait until three days before the next payday to realize they are out of money and then wonder where it went. Budgeting without tracking is like showing up to the 5k expecting to finish in 30 minutes without ever having practiced running a mile. Successful budgeting starts by examining your spending habits and then little by little adjusting them so that you are practicing what you want your budget to actually be. Total up how much you spent by category and divide by the number of months you used to pull the information. You should now be able to see an average of how much you will likely spend in each category.

8 Categories Average Amount Spent Step 2: Determine your expected income You can't know how to budget unless you know what you are budgeting. If you are a salaried employee this should be easy, just take a look at your paystub. If your income varies, try taking the average of the last 3 months of income and using it as a guideline. If you really want to play it safe, you could just use the lowest amount of income you've made in the last 3-6 months. Now compare your expected income to your anticipated spending. Is there a difference? Is your income more or less than your anticipated spending? Average Monthly Income =

9 Step 3: If your anticipated expenses exceed your expected income, evaluate what areas in which you are willing to cut back or how much more money you will need to make. I know math is probably not your thing, but do it anyway, I'll even let you use a calculator. Figure out exactly how much the discrepancy is and how you will make up for it. Will it be easier to cut some spending or to pick up a second part-time job? Expenses - Income = Areas I Will Cut Back In: Ways I will Make More : Step 4: Take action! Cut back or Make more Make those phone calls to cancel subscriptions, or get rid of things that are causing you to spend more. Start selling your junk for extra cash, or apply for another job to help bring in that extra income. Do what you got to do to meet the numbers you set out in Step 3.

10 Step 5: Set a realistic budget, incorporating where you will cut back and where you will apply the extra money you will make You should have a list of categories from Step 1. Now take that list and budget an amount for each category. How much you budget for each category should be somewhere between your actual past number and where you'd like to be. Remember, to take baby steps, it will help to keep you motivated to stick to your budget. Categories Budget

11 Step 6: Track your expenses to make sure you are sticking to your budget and know when to stop spending It does you no good to create a budget and then do nothing, you will spend more if you don't actually pay attention to what you have budgeted for each category. Also, remember that you can change your budget from month to month, it is not something set it stone or a set it and forget it type of document. It is one that will require regular reviews and revisions. Expense Amount/ Budget / / / / / / / / / / /

12 Step 7: Reevaluate and Revise Regularly Life changes and so will your budget. Be sure to reevaluate and revise your budget as necessary. You can use this handy chart I made to help you determine what should stay part of your budget and what needs revising.

13 Budget Tools I've found that I stick to my budget best by writing it down on paper. However, I've tried different budgeting tools and methods and have found them to be helpful in finding weaknesses in my budget. It can be great to learn how to budget using Mint.com and YNAB as they are online tools with some preset categories and great blogs. If spreadsheets aren't your thing YNAB and Mint could be great alternatives. YNAB: You Need A Budget YNAB is not free but it is super affordable at just 5 a month or 50 for the year. YNAB operates under 4 rules. Rule one-give every dollar a job. Rule 2. Save for a Rainy Day. Rule 3. Roll with the Punches. Rule 4. Live on Last Months Income. YNAB has an app and will automatically import your expenses, it's extremely userfriendly and they hold webinars to help you get the most out of using the tool. You can do a free 34 day trial to see if you like it before spending money using YNAB. Mint.com Mint.com is free and will track all your expenses and categorize them for you. However, you will want to make sure that everything is correctly categorized. This is something I found frustrating when using Mint. However, tracking your expenses is just one part of what Mint.com does, it will also let you set budgets for each category and keep track of where you are throughout the month. It also shows if you've gone over budget and by how much. Bonus: There is an App, so your budget is just a click away on your phone.

14 Budgeting Mistakes to Avoid Hooray! You know how to budget and you've set your first budget, now what? Avoid the mistakes I made when I first started budgeting. Here are the three biggest budgeting mistakes and how you can avoid them. Mistake 1: Having a Set it and Forget it Budget The Mistake: Budgets are not crock pots, you can't just set them and forget them. Writing out your budget is great but it does little to actually help you take action on that budget. How to Avoid It: In order to actually stay on budget you have to keep track of your spending throughout the month (or whatever your budgeting timeframe is). Sit down and input your spending to see where you are with your budget, it may be that you do this throughout the day as you spend or at the end of each day or the end each week. Though any further out and you are likely to lose track of how much you spend and how close you are to going over budget. Mistake 2: Letting One Thing Throw Off Your Entire Budget and Giving Up on Budgeting The Mistake: You planned and tracked and set up the perfect budget. Then life happened and life isn't perfect, it comes up and knocks your pretty little budget right on its ass. It's a parking ticket, a medical crisis, a broken appliance and now you're pulling extra funds from anywhere you can and try as you might you still end up over budget. Why did you bother budgeting in the first place? Budgeting just seems impossible, screw it, I'm done, at least for this month. I'll try again later. Sound familiar? How to Avoid it: Incorporate a buffer into your budget to cover things you forgot to budget or small unexpected expenses and build up an emergency fund to help cover those big unexpected expenses. 1k is a good place to start with an emergency fund. By the way, a credit card is not an emergency fund. I talk more about how to build an emergency fund and a buffer in this post.

15 Mistake 3: Not Continually Adjusting Your Budget The Mistake: Change is part of life, we already discussed how you can't just set and forget your budget once created for the month, but you also you shouldn't have the exact same budget each month. You will have various irregular bills throughout the year, birthdays and holiday gifts from time to time and weather will affect your utilities bills. How to Avoid it: In addition to tracking your spending throughout the month, at the end of the month look at the big picture and evaluate how you did overall. Make adjustments and cuts where necessary. On top of that, check your calendar to see what extra expenses you may have coming up. These could be insurance bills, upcoming events (birthdays, anniversaries, holidays), trips or nights out (concerts, plays etc). Then start budgeting for them, keep in mind you can set aside a little each month towards these expenses, you don't have to wait until the month of to add it into the budget. Good Luck with Your Budget! Let me Know How it Goes!