With the holiday season around the corner, many of us find ourselves crunching numbers and clambering in our wallets to see if we have the money to spend on holiday gifts for others (and for ourselves too). Throughout the year, but especially at this time, it is vitally important that you know where you stand with your money. One of the simplest ways to do this is to set up a budget.
Before setting up a budget, it is important to know exactly where your money is going. To do this, track your expenses, savings, and income for a month. I like to do this in Excel. Alternatively, you could use Google Sheets or an app that helps you track your spending and income.
If you are using Excel or Google Sheets, start by making a column for your expenses and label it at the top. Below that there should be three columns, one for the date, one for a small description, and one for input. Do the same thing for an income category and a savings category. At the bottom of each category, you should put a total for that category. You can do this by using the SUM formula in Excel.
Here is an example of what your finished product could look like
You can, of course, customize this however you like, but you can use this as a template to start making your budget. You can use this method as a guideline to see how much money you have leftover after subtracting your expenses and savings from your income. We can summarize this in a simple equation: Income – (expenses + savings) = your financial flexibility. Your financial flexibility is the amount of money you have as a “buffer” to cover extra expenses. Alternatively, you can also put this money into your savings or put it towards buying gifts for others this holiday season.
After tracking your money for a month or two, you may decide that you will use this method as your budget. This is the method I use for my budget because I like to know exactly how much money is coming in, going out, and getting saved.
You can continue using this tracker, but if you want to take this a step further, you can create categories such as groceries, entertainment, and gift shopping and place a limit on each for each month. These categories can change from month to month and you may have to make adjustments, such as if the cot of your rent increases. You can use the information you gained in tracking your money to decide what the limits on each category should be. For example, for the giving season, you may decide that you have enough money to spend about $30 on each of your friends for a gift.
Making a budget is essential to gaining control of your money and can be especially helpful if you need to gain control of your spending habits. A budget is also not static and it can change as you need to reach your financial goals