Feeling stuck with where your life is at? Are you trying to make a budget so you can actually grow your savings? You probably don’t know where to start—what’s worth spending on and what’s not?
How to Set Up a Budget in 9 Steps
Here’s how to create a budget you’ll actually be able to stick to. Even skipping a single step will mess you up—so don’t even bother trying if you can’t follow every one.
1. Set Goals
Before you even take a look at your finances, you need to set some financial goals. Goals are why budgeting is essential in the first place. Poverty is a lifestyle choice, rich is also a lifestyle choice. You need to choose which way you want to go.
Most likely, you’ll have a mix of short and long-term goals. Short-term goals are things like taking a vacation, having funds for investing, or paying off a credit card.
Long-term goals are paying off your debt, buying real estate, and ultimately being financially free so you can do whatever you want.
When making your list, you can write down as many goals as you want, but you’re only going to actively work on one or two goals. Try to do more than that and you’re just setting yourself up for failure.
2. Look at What You’re Spending Money On
When learning how to make a budget, you have to look at what you’re spending all your money on. People tend to spend money without even realizing it. Look at your credit card statements from the past couple of months, and split your expenses into two categories: Fixed and unnecessary.
Start with fixed expenses:
- Utility bills
- Car payments
- Student loans
- Credit card bills
- Health insurance
- Car insurance
Then look at all the unnecessary things you’ve spent money on. These tend to be wants rather than needs:
- Eating out
- Extra clothing
- Extra food you don’t need
- Streaming services
3. Pay Yourself
When making your budget, don’t forget to allocate some money toward yourself. This doesn’t mean setting aside money for fun. No, this means savings.
Nothing will hurt you faster than an unexpected emergency that drains your funds.
This is why you need to set aside money every month to put in your savings. Even a small amount is better than nothing. This way, when something happens, because something always does, you can cushion the blow.
4. Chop, Chop, Chop
Now it’s time to start cutting unnecessary expenses. This is hard for most people because they don’t want to cut away the entertainment they get from objects and activities.
But you have to ask yourself: “What are the things I am going to say no to so I can say yes to the things I want most?”
So, things you can cut:
- Streaming services
- Any form of a monthly subscription
- Eating out
- General shopping
The occasional splurge is acceptable because very few people can live this strict type of lifestyle without breaking. Just make sure it’s an occasional treat instead of a daily expectation.
5. Get Better Friends
Nothing will derail your budget faster than pressure from people close to you, especially if they don’t get it. You can’t push a loser up a mountain—so if they don’t share and respect your values and goals, get rid of them and find better friends.
6. Deal with Minor Inconveniences
A majority of useless spending is due to not wanting to deal with the inconveniences that come with a simplified life. This can mean walking more instead of getting an Uber, buying grocery store brand food instead of the more expensive options, or even negotiating down prices—like for cars or services.
Try to negotiate things that aren’t normally negotiated on, like your rent. Can you mow the lawn or shovel snow to pay less in rent? You can get paid well to be comfortable in situations that most people aren’t.
7. Use Time Better
You know why people spend money on stupid things? It’s because they have too much free time on their hands.
Instead of spending all day in bed daydreaming of what your life could be like, get up and make it happen! Your free time should be spent improving yourself. Start taking classes or reading books, start a side hustle—do what you have to do to accomplish your goals.
8. Communication is Crucial (Budgeting with a Partner)
If you’re budgeting with a partner, communication is essential. If you both don’t share the same goals—financial, emotional, and business—then everything is going to fall apart real quick. Even the smallest details can cause a catastrophe.
It can be awkward to discuss finances, but you both have to get over it and discuss things openly. You should also both schedule a time dedicated to budgeting, so it doesn’t get done half-assedly.
Do you share your budgeting goals or have separate ones? What are unnecessary expenses you can cut as individuals and as a couple? Do you want a joint account, or would you both prefer separate accounts?
If your relationship can’t survive these questions, it absolutely won’t survive the challenges life will throw at it down the road.
9. Stop Making Excuses
The biggest hindrance to you having a set budget is your procrastination. People like their excuses more than their goals. It doesn’t matter how much you make or how hard you work—only results matter.
Learn How to Be Financially Literate with Derek Moneyberg
Learning how to make a budget is the easy part. Sticking to it is where most people fail. With the right guidance, you can stay disciplined and focused on saving. Additionally, you can start to level up your earning capacity, make more money, and ease your financial restrictions.
Derek Moneyberg’s mentoring program focuses on helping you develop frameworks and mental structures in your head that will allow you to make better financial decisions, negotiate for what you’re legitimately worth, and build your wealth over time.