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Budgeting for Dummies: How to Create a Budget You’ll Actually Stick To

If you don’t like crunching numbers, you’re not alone. But there’s no getting around it–you need a budget. With our ‘Budgeting for Dummies’ guide, you can avoid those financial pitfalls and realize your goals.

As life becomes more complicated, the last thing you want is financial uncertainty. But there is a clear path between ‘dummy’ and ‘guru.’ There are simple steps you can take today to get your budget on track.

Most people avoid budgeting not because they’re lazy or irresponsible. Visualizing your finances can seem intimidating. Some see it as restrictive or worry they will be disappointed with their findings.

A successful budget does the exact opposite. Your budget can be liberating, freeing you of concern for financial obstacles to come. With everything in one place, you can rest easy knowing how finances are coming and going.

Budgeting for Dummies: Not a Dummy for Long

The first misconception is that creating a budget is endless work. The first few steps will take some time and crunching to get it right. But after the hard part is over, you’ll find it’s a flexible and useful tool you’ll come to enjoy.

The next misconception is that your budget will limit the things you can do. Remember, your budget is a reference that is meant to keep you secure. It’s designed to help you plan to do those things you really want to do.

We’ve broken down the steps to creating a monthly budget. As we walk through them, we’ll highlight how each will help you succeed. We suggest using a spreadsheet, but a pen and paper will do.

Determine your Monthly Expenses

Create a horizontal timeline for a single month with columns for every day. Start with your bills that are consistent month to month. Insert the amounts under each day, assigning each bill to its own row.

Calculate how much money you spend on other things each month. You can do this using a tool like Acorns, which sums up your monthly expenses. Find the average spend per day and add them all on a single row.

You’re building in flexibility. These numbers won’t reflect your actual daily spending. They will allow you to make projections and adjust your budget as often as you need.

Determine Your Monthly Income

If you have a regular paycheck, add in the net amount on the days you are paid. Use an individual row for each source of income. If you have infrequent income, you may want to guess or exclude it completely.

Now, do a sum for each day, with each amount carrying over to the next. You should see a row of numbers that will change as you add or remove items. This is your estimated daily balance.

Check Your Financing Options

You’ve now created an easy tool for managing monthly budgets day-to-day. You can add items easily if things change. For example, if you invest in personal financing, you can add payouts as income and repayment as incremental or lump expenses.

Doing this in Excel gives you greater ease and flexibility. You can use formulas so that daily amounts change with each update you make. You can easily copy and paste budgets month-to-month as well.

More About Budgeting from LittleLoans

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