Introduction In 2013, I wrote a blog series titled, Budgeting Basis 101: A Step-by-Step Guide to Setting Up a Budget. The response to that series was overwhelming and inspiring. In an effort to help others reach their full financial potential, I decided to turn that series into an eBook. My hope is that you will benefit from having this eBook as a reference to building a budget.

Your budget will only work if you make it work. There is no magic formula or super-power spreadsheet that will make your budget work for you. If you want to succeed at budgeting, you have to be proactive and active in keeping your budget maintained.

In this book, you will learn the four basic steps to setting up a budget. The four basic steps are as follows: determine your monthly income, determine your monthly expenses, determine where you can squeeze, and setting up your budget.

This book is designed to be very basic and easy to follow. I hope this book will be a great resource for you!

Budgeting Myths Debunked There are many myths and falsehoods about budgeting out there. These are only a few of the most common budgeting myths: Perfection

There is no such thing as a perfect budget. You will have months and maybe even years with a great budget but you will also have months of a less than par budget. This is why it is imperative that you establish and maintain an emergency fund.

Get Rich Quick

Many believe that you will somehow magically get rich overnight when you budget. The purpose of budgeting is to learn how to live within your means. Instead of budgeting so you can afford a $400 car payment, budget so you can save the money to outright buy a car. That will make you rich - because you will not owe anyone a dime.

Excuses vs Reason

I hear many times all the reasons in the world why someone's budgeting is not working. The truth is most of these are not reasons they are excuses.

A reason is valid and usually unavoidable. To date, I have yet to hear a true reason why a person should not budget. An excuse is a transparent attempt to shift blame away from one’s self. Some of the most common excuses I hear in regards to budgeting are:

These examples above are all excuses. None of these are reasons why your budget cannot work. Budgeting does not go off how much money you make or do not make. Budgeting is all about telling your income where it has to go every month. Stop making excuses and start doing. Budgeting is not easy but it is not brain surgery either.

“My husband doesn’t make enough money to worry with budgeting.”

“We can’t find more room in our budget and we can’t get rid of our cable, cancel our gym membership, or cancel our monthly subscriptions.”

“It’s my wife’s fault why our budget never works. She is always spending money and never sticks to the plan.”

Unexpected

This goes along with excuses above. The unexpected will happen. Does not matter if you are a millionaire or you have $2 in your pocket, the unexpected will happen. When the unexpected happens and the original budget no longer applies, instead of throwing out budgeting all together, re-budget. You need to budget this now unexpected cost, which may mean you have to take money from one category to apply it to the unexpected cost.

These are only four of the most commonly heard budgeting myths. The hard part of budgeting is the actual living by a budget. You will have to force yourself to do it; no one else can make you.

Step One: Determine Your Monthly Income The first step is to gather up your paycheck stubs (or look at your past month's bank statement of deposits). If you are paid the same amount each pay period, your income is easier to determine. Just add up the totals from the past month after any taxes. Just make sure that when you are determining your income for the next month you look at your payday on a calendar. Some months have more paydays than others do.

If you have irregular income, you will have to come up with an average or expected amount to be paid each month. Keep detailed records and always record your time. Keeping detailed records will make the budgeting process easier with irregular income.

Step Two: Determine Your Monthly Expenses Start with the easy expenses to determine; the monthly ones. Gather up all your regular monthly bills {like utilities, insurance, car payments, etc} and try to have the statements from the last 3 months for all non-fixed payment accounts {typically, this will be your utilities}. Once you have your statements, write out by hand how much each one is. For the utilities, you will need to come up with an average based on the last three months. How you do this is by adding up all three statement totals and then dividing by 3. Round up whatever number you get and use this number for that utility/bill. Once you are finished with determining your regular monthly expenses you should have something that looks similar to this:

Car Payment: $400 Insurance: $100

Mortgage/Rent: $800 Water: $30 Power: $80 Gas: $25

Phones: $75 Internet: $60 Cable: $50 Loans: $300

Savings: $100

Tip: Round up all your expense numbers and round down all your income numbers when making a budget - this will make doing the math easier!

Now that you have determined your monthly expenses move on to the more challenging expenses the day-to-day ones. The best way to do this is to look at your previous month's bank statement {if you do not already keep track of these expenses}. When looking at your bank statement, cross out anything that does not apply {like your monthly expenses above or your income}. Once you can actually see what your expenses are, start going through them with a fine toothcomb. Start by trying to determine which ones are grocery related, as that is typically the next biggest expense. After you determine how much you spent on groceries last month, determine how much you spent on fuel/transportation. As you find these transactions, cross them off in order for you to better keep up with what you have calculated and have not calculated. After you have your grocery and fuel expenses determined look

through the remaining expenses. What were these expenses? Clothing, haircuts, do not remember? If you know what the remaining transactions were specifically for then you can determine a budget category {i.e. car maintenance, clothing, entertainment, etc} for that expense and write down the expense amount. If you do not know what the purchases were for then they are incidentals. In other words - these are the first expenses that you will want to try to cut back on in step #3. Now you should have something that looks like this on paper:

Car Payment: $400 Insurance: $100

Mortgage/Rent: $800 Water: $30 Power: $80 Gas: $25

Phones: $75 Internet: $60 Cable: $50 Loans: $300

Savings: $100 Groceries: $400

Fuel: $250 Clothing: $100

Incidentals/Misc.: $150

You can now take your monthly income and subtract it from your expenses to determine if you are in the red or not. Do not panic if you are, many people are in the red. Moreover, even if you live and breathe by a budget it is always possible to get back in the red.

Step Three: Determine Where You Can Squeeze This may be a challenging {but very doable} step. This step requires that you take a very hard and honest look at the expenses you configured in step #2. If you are very deep in the red, you are going to have to really focus and cut back on as much as you can. If you are hanging on by a thread, you may also want to buckle down and figure out ways to cut some expenses out. There are several ways to cut back, some easier than others. The first big budget buster is incidentals. If you are spending money on things that you do not necessarily need right now you may want to halt your spending. In other words, if you are frequently going to Target and you find yourself walking out with about five other items that you did not intend on buying, then you really need to stop. It is very easy to justify all those little purchases. The 'oh it's just a dollar' or 'wow, that's an awesome sale price!'. When you cut yourself off, you will see the big picture of how much you are spending where you do not need to be. Another place to cut back is on entertainment. What is classified as entertainment? That is your fun money. I am not implying that you cannot have fun but if you are in the red, you need to consider free fun. Trust me; kids can make their own fun and so can adults. Pinterest has a plethora of ideas for free and frugal fun. Another entertainment cost that can really drain a budget is cable/dish. You really may want to consider saying bye, bye to cable T.V. for a while. In addition, your cell phone(s) can really bust a budget. Consider how much you are paying each month and think about cutting your data and text messaging off for a while. If you have the internet and a computer, do you really have to have it on your phone too? There are also ways to save on your regular monthly expenses. Start searching and gathering quotes from other insurance and utility companies. You might be surprised at how much money you can save by being willing to switch. Call your utility providers and see what options they have as far as rates go. I know I have saved us just over a $100 by fixing our gas utility bill's rate. You may be able to do the same - or switch providers if possible. Another place we spend a lot of money on is convenience. Consider allowing yourself to be inconvenienced in order to save money. Start making your own cleaners,

cooking meals at home, using cash instead of debit, using coupons, using refillable containers, etc.

Step Four: Set Up Your Budget You will set up your budget using the information you gathered in steps 1-3. There is no right or wrong way to setup your budget. In fact, you may go through many formats before you find the one that works best for you. I prefer to write out my budget by hand, as I have found that helps me keep better track. However, I know that is not how everyone likes to do it. If you like a more computerized approach {where you can set up email reminders, etc.} I suggest you try a free site like Mint or LearnVest. Regardless of how you decide to maintain and set up your budget, the basic way that your budget should function is as follows:

Total Income – Total Monthly Expected Expenses = Difference to be applied towards savings/Debt payoff

You will need to track your actual expenses and apply the same formula above.

Total Income – Total Monthly Actual Expenses = Difference to be applied towards savings./Debt payoff

Conclusion I hope that you have found this eBook to be of benefit to you and your family. If you enjoyed this book, please share it. My goal has always been to help others reach their full financial potential. If you would like to receive more budgeting advice and follow my real life on a budget, I invite you to visit me at my home in the blogosphere. Please visit me at www.thebudgetmama.com. Thank you so much for your readership! Jessi

About the Author

Jessi is a sleep deprived mother of two boys. She is married to her Prince Charming and has the most beautifully imperfect life. She is an avid money saver and frugal shopper who loves a great budget. She accumulated, survived and paid off over $30,000 in debt before turning 30.

During her years in college, she realized that there were no courses offered (or required) for personal finance. Personal finance is something that affects everyone, from every walk of life and is something that should not be taken lightly. After

earning her accounting degree from Kennesaw State University she decided to help change America’s debt crisis. Her vision is to inspire and encourage others on the road to financial freedom.

If you would like to connect with Jessi, you can find her here:

The Blog: The Budget Mama

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