Create a Budget
Be a Rockstar!
***Just joining us? See Create a Budget Page 1
Side note: Also resist the temptation to say, “Oh, this won’t be an expense in the future. That was a one time deal….” While that may be true, don’t whittle until you have the complete picture in front of you.
4. Decide on major categories in which to classify your expenses and income, for example, housing. As minor categories you could have rent/mortgage, utilities, insurance, maintenance, landscaping, etc. Decide most major and some minor categories now, add categories as you need them. KEEP YOUR INCOME AND EXPENSES SEPARATE! See why Excel makes this a lot cleaner? I recommend you list your categories (like rent, utilities, etc.) in the rows and the months in the columns.
5. Ladies and Gents . . . Start your charting! Using your statements place actual amounts in your major and minor categories by month. For example, you pay $1310/mo in rent – easy, put $1310 in the rent row for each month. However, you get the oil changed in your car every 3 months . . . what to do? At this point, put the oil change amount in the months you spent it (May, August, November, February).
***Special Case***If you pay $1310 in rent each month, and your roommate pays you back $655, put $1310 in the RENT EXPENSE row and $655 in the RENT INCOME row. Chances are you are “on the hook” whether your roomie pays you or not, right? So it is better to acknowledge the full amount you potentially owe each month….
Side note: Step 5 should take you an hour or more. The more detail, the better. Don’t forget to include your income categories too. It is a long process, but well worth it! If you find this taking you days . . . you’re either doing something wrong (call me) or you’re not really doing anything at all. Honestly assess your progress. Few people enjoy this step. Perseverance wins the day. This is all part of your plan to BUILD WEALTH. Focus…. Create a budget.