Start Building My Budget
Start Building My Budget:
Step One: Income
Open the BuildMyBudget Tool and enter today’s date, how often you receive a paycheck, the average amount of your paycheck after taxes and other items have been taken out, and the date of your next paycheck. You can click on the “Open Calendar” button to open a calendar which will help you select a date. Also enter the current balance of your checking and savings account.
Make sure that you think about the average amount of your paycheck before you move to the next step. If you got paid a little overtime or received some extra compensation on your last paycheck, you don’t want to use that amount to create your budget because you probably won’t always receive that extra income. The idea is to try and find a conservative amount that you can count on receiving for the next 12 months.
At this point, your budget should look like this:
Step Two: Expenses
Now that the income section of your budget is complete, it’s time to gather your expense information. First, grab a sheet of paper or use the Monthly Expenses worksheet to create a list of all of your bills and what day each bill is due during the month. Your list should look something like this:
Don’t forget to include expenses like tolls for the drive to work, haircuts, or even your morning coffee. When it comes to your water and electricity bill, amounts that might change each month, try to make a conservative estimate of what you usually pay each month. Once you are finished writing down all of your bills and the date each one is due, double check that you haven’t forgotten anything!
Once you have your complete list of bills, use it to enter your expenses into the BuildMyBudget tool. Pay close attention to the instructions to make sure you are entering the correct amount of each expense. For this example, we will use the expenses we entered into our Monthly Expenses Worksheet:
Of course your monthly expense list may not match ours, so you can click on each category offered and use the drop-down list to change the category or you can simply type in your own. Don’t forget to include all of your necessary expenses such as food and housing. Try to be as accurate as possible—the more accurate the information you put into your budget, the more accurate your results!
Step 3: Forecast
Once you have entered all of your expenses, it’s time to move onto the next step. Now click on the “To Budget” button so you can take a look at your monthly budget or “To Budget Forecast” to look at your 12 month outlook.
First, click on “To Budget” to see your monthly budget:
As you can see, our example budget has a remaining balance of $406.00. This means that we can go back to our inputs and increase our credit card payment, or enter an amount to transfer to savings. If your expenses exceed your income, you can go back to your inputs to try and reduce your expenses before moving forward. For example, if your remaining balance is -$20.00, chances are you can adjust your food expense or a credit card expense to ensure that you have a positive monthly remaining balance. You may have to eliminate an expense altogether, such as your cell phone or cable, in order to create a positive remaining balance.
When you’re satisfied with your monthly budget, select the “To Budget Forecast” button to see your BuildMyBudget Forecast. This is the most valuable aspect of the BuildMyBudget method of budgeting—being able to see where you are headed! Our example forecast looks like this:
Now that you have completed your BuildMyBudget Forecast, you can easily see where you are headed financially and have a roadmap for when each bill is due and out of which paycheck it should be paid. If you click on the “12 Month Outlook” button you will see the amount remaining in your checking account and savings account after 12 months of following the budget you have created. In the example, our 12 month outlook is:
You can select the “Back to Beginning of Forecast” button to navigate back to the beginning of your forecast.
After looking at your 12 Month Outlook you should have a good idea of whether or not you need to adjust your budget. You may need to go back to your inputs to reduce some of your expenses or remove them altogether in order to create a Forecast that will help you reach your goals. Maybe by forecasting your income and expenses you have realized that you are on a downward financial spiral because you go out-to-eat lunch with your coworkers every day. Perhaps your monthly subscription to premium cable is pushing you into the red. Check out the BuildMyBudget worksheets to see if one can help you identify where you are overspending. Whatever the case may be, by attempting to forecast your future income and expenses as accurately as possible, you can see where you are headed and make decisions TODAY that will make TOMORROW a success.
You may also need to go back to your inputs so you can increase your transfer to savings each month. You don’t want your extra income sitting in your checking account if you could earn a little interest in your savings account!
You can adjust your budget inputs as many times as you need before you start to use your budget. But once you have a working Forecast, it’s time to start using it!