GrowingSlower blog Shannon Brown
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How to Make a Budget {Part 2}

How to Make a Budget

In Part 1 of the How to Make a Budget series we took a detailed look at our existing spending habits. I know this was an eye opening experience for our family. Now in Part 2 we will take that information and combine it with our goals for spending and saving to make a budget. 

Calculator with budget caption: How to make a budget

Categorize Expenses

In Part 1 we organized our expenses into about 10 categories such as utilities, savings, donations, and transportation. Now we will take each of those categories and put into one of three groups. I like to organize my expenses into these three groups: fixed, negotiable, and variable.

These groups help me see which of our expenses we can be saving money on and how. For instance, fixed expenses like loan payments and rent are relatively difficult to change. Of course even these are not really fixed. You could pay extra on your loans or move to a more affordable house.

The negotiable category includes monthly payments like house and car insurance, internet, and cable. You could save money by calling your provider and negotiating a lower rate or by shopping around with different companies.

Variable expenses are categories like groceries and utilities that vary from month to month. We have the greatest amount of control over our budget in these areas. Though it may be a challenge, we can almost always manage to save a few dollars in each of these categories.

Make a Budget to Save Money

This is a great time to set some financial goals for the year. Your budget shouldn’t just reflect what you spend now or what you can afford to spend. Instead, you can set targets of what you would like to change about your spending habits. Perhaps you want to add a monthly charitable donation or a contribution to your savings account. Maybe you want to reduce your clothing spending or your utilities.

No Spend Month LogoI imagine most of us are going through this process of making a budget because we want to reduce our spending. There are a couple of ways to go about doing this. It maybe a good starting point to reduce your spending on variable expenses by 10 percent across the board. Alternately, you could pick two or three goals from the 37 Easy Ways to Save Money list and incorporate those into your budget.

When making your budget, be sure to account for expenditures that occur only once a year or even less often. These may include renewal of your drivers license or car registration or annual memberships. You can use your itemized spending history from Part 1 to estimate your monthly expenses, but consider how these may vary from month to month. For instance, utility bills may be higher depending on the season.

Linking up with Frugally Sustainable

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  1. sometimes the budget means really realizing how much you buy that you do not need.

  2. Most likely we are moving this summer when my husband {hopefully} gets accepted into a Doctoral program. We will be downsizing a LOT, so I think we will make our budget then for the school year. I will have to bookmark your posts and come back to them for guidance!

  3. I’m bookmarking this. My hubby and I are trying to do better financially, so this is a big help! Thank you!

  4. We’ve found that tracking your utilities/energy bills (which are part of the budget) is a great way to motivate energy and water savings. A simple spreadsheet works as long as your track the amount of energy consumed in addition to the cost.

  5. I am all about creating a budget, but then I freak out when I see how much our expenses really add up to. Even just the basics like mortgage/rent, insurance, car, food … it’s scary when it exceeds your monthly income. Sitting down and doing it might help though!

  6. I have been learning to live without a lot and learning to do with what I’ve got. Thanks for this post (:

  7. A lot of great ideas on those list. If you have any amount left over after you have paid all your bills, start out each month with same amount. What is left over on payday, move to a savings account. Also save $5 bills and see how much it adds up to. Look over your checkbook register and add up all your have spent on groceries..then divide by # of weeks in month..get cash from bank to put into Dave Ramsey cash envelopes. I’d like to try this but I know DH won’t agree to it. Look in your pantry and see what you can do without..I tend to drink way too many canned sodas..not good for me. I will “try” to not buy them by carton, only drink one when eating out or just buy one single bottle or can. Drink water instead or lemonade or Ice tea.
    Cut back on how much we tip our wait staff in addition to what is added to bill already at this one restaurant we frequent. Cut back on how often we eat out, where we eat..”stop eating too high off the hog.”


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