How to create a budget

A Budget is how you take control of YOUR money.

  Unfortunately, some studies have shown as many as 87% of teens don’t know how to govern their money (https://www.foxbusiness.com/features/teaching-gap-83-of-teens-dont-know-how-to-manage-money). We at Budget Mentality find that unacceptable. Today, we mean to rectify that!

  There are really only 5 basic steps to remember when creating a budget…

  Step 1: Figure out your monthly expenses.

  This should not only include your typical bills such as: housing, transportation, gym membership, phone bill, groceries etc… But don’t forget about other expenses like buying bottled water, eating out, buying energy drinks/coffee, clothing, etc. Anything you buy regularly should be on this list.

  Step 2: What’s your take home pay?

  This is the amount that you make after taxes. For this exercise, we’ll assume you work a job and your taxes are automatically taken out. So this should be easy to quantify.

  Step 3: Develop a plan.

  Now that you know how much money comes in each month and how much you spend, you will need a financial plan. But in order to make a plan, you’ll need a goal. I mean, you can’t develop a route on your GPS if you don’t have a destination in mind.

A good example of this is myself. My financial goal this year is to purchase a quad-plex. My take home pay is conservatively $7500 per month. My expenses each month consist of rent, utilities, car insurance, health insurance, BJJ & MMA membership, gym membership, fuel, tolls, vehicle maintenance, phone bill, groceries, and blow money (no officer, this isn’t for drugs). This puts my total monthly expenses right around $2400. So if I bring in $7500 per month and only spend $2400, that leaves me with $5100 per month to throw at my goal!

    Now personally I have zero debt, and already have a fully funded emergency fund (6 months of expenses). So I can focus all of the $5100 towards my goal. This money will be automatically be put into a savings account each month.

  In the area I’m looking at buying in, the typical quad-plex goes for around $300,000. After speaking to several loan providers, I’m convinced that I can buy with just 5% down! With this being said, it puts my down payment at $15,000. But wait, there’s more! The properties that I’m looking at will typical need a bit of rehab work done, so I’m going to add an additional $30,000 to my goal. This puts my total at $45,000! If I didn’t have a plan that number might seem daunting, but I do, so no worries! All this means is that in order to meet my goal this year, I’ll have to save that $5,100 for 9 months. See how that works?!

Step 4: Stay on track!

  The best way I’ve found to stay focused and on track is two fold. First, I write out my goals each and every morning. This helps me to remember why I’m delaying gratification, as well as staying motivated and disciplined. Secondly, I use a budgeting app regularly. This really streamlines the process and allows me to easily track my progress (Insert link to my top 5 budgeting apps). If you’re old school, you can always use a Budgeting journal. Regardless of how you budget, if you do these two things; you’ll be unstoppable!

Step 5: Revisit and revise your budget.

  Chances are that by following these steps and changing you’re behavior, you’ll see a gradual shift in your mindset. Four months into this endeavor you may decide that in order to speed up this process, you’re going to cut out some of your unnecessary expenses (link to 10 ways you waste money). And/or you’re going to start a side business to help increase your income (insert 10 best side hustles). This is when you come in and adjust your budget.

Follow these simple steps and you will make money work for you!