How on Earth Do You Create a Budget

If your income is no more than $2,500 per month and your costs include transportation ($8/day), rent ($1,400), food ($20/day), and entertainment ($20/night out). How much savings will you have left on the last day of the month?


Can you employ a system to arrange your cash-flow better? The answer is YES.


This system is called budgeting. A budget estimates your revenue and expenses over a period of time. By listing your sources of income beside your monthly expenditures, you will get an idea about where your money goes. This way, you can make smart financial decisions and prioritize your obligations to reach your financial goals.


Creating a budget for the first time is like learning how to swim. At first you are scared to dip into the waters like how scared you are to face those mountains of debt. Although you know it is healthy for you, you cannot just dive in and go. You must firstly learn about the different strokes and breathing techniques by practicing.


Much like the aforementioned Sport, one must build a budget by following one step at a time. Here are the efficient steps to create a working budget:


1. Envision Your Goals


Success starts with the workings of the mind. Envision your financial goals and analyze how you will achieve them. Make your goals S.M.A.R.T. so you would not have unrealistic expectations. By S.M.A.R.T., I meant that goals must be:








For goals to be specific and measurable, you must quantify what you want. For example, your goal is to purchase the 2016 BMW M6 F12 LCI Auto worth $334,195. For goals to be attainable and realistic, you must examine if you can really afford it at your current situation. Sticking with the example above, you realized that you can only afford the used 1996 BMW 535i E39 Auto worth $1,200 with your salary.


After satisfying S-R goals, you must budget according to your timeframe. List all your financial goals and divide them into short-term and long-term goals.


2. Gather the Necessary Information


Gather the Necessary Information


Collect all the past salary invoices, credit card statements, utility bills, bank statements, and receipts. Estimate how much you make and spend each month by using these necessary resources.


Start your budget by calculating your revenue. Add all your sources of income both from your part-time and full-time jobs (if any). If your job hours vary each week, use your minimum monthly wage as a basis for your budget.


3. Identify Your Fixed Expenses


Identify Your Fixed Expenses


Upon looking at your resources, identify the expenses that you cannot live without. These essential expenditures are called fixed expenses. Fixed expenses include rent, utility bill, and insurance. As they are stable each month, allocate a portion of your income to these category first.


4. Allocate Money for Savings


There should always be a budget for savings. Savings are your gateway to long-term financial goals and your safeguard against unforeseen events. Set aside at a certain percentage of your revenue each month to help build a nice nest for your future. I personally recommend at least 10-20% but you have to give a percentage that you can maintain for the months to come.


5. Determine Your Variable Expenses


Determine Your Variable Expenses


For newbies, the greatest fear that most people have when creating a budget is that they will have to cut back on the entire “FUN FUND” such as occasionally dining at fancy restaurants and traveling overseas once a month. While you may find yourself eliminating some of these non-essential costs, you do not have to turn away from it all. You still need to reward yourself to maintain life satisfaction.


Opposite to fixed expenses, these non-essential or variable expenses vary from month to month. The remainder of your revenue will go to this category. Play around with the numbers to determine what you are comfortable with spending and what you can really afford.


6. Use Digital Budgeting Tools


Use Digital Budgeting Tools


Along with the technological advancements are digital budgeting tools that are both convenient and reliable. Supplement your budget with a calculator that enables you to know your cashflow. It is called the Budget Planner.


Then, download free apps that enable you to track your spending. Some of these apps are:


TrackMySPEND, Wally,  Prosper Daily and Mint. These tools will help you learn an important budgeting skill – organizing.

Anna Agoncillo

Anna is a Registered Psychometrician and a graduate of Cardiff Metropolitan University, United Kingdom. Earning a bachelor's degree with honors in Psychological Studies, lead her to a career of writing and teaching. She is also the author of the new book entitled Psychology of Love, Money, & Life.


Leave A Comment

Your email address will not be published. Required fields are marked *