How to Begin to Create a Budget – The First Step

In order to create the most profitable budget, you must carefully tackle this very important first step on how to begin to create a budget!

Are you debt-blind?

The very first, most important, step for how to begin to create a budget involves taking an honest look at how you have been utilizing your income so far. In order to carefully tackle this evaluation of your spending habits, we will start by gathering your financial history over the previous year. Being “debt-blind” keeps you in the dark about your finances. That darkness only leads you deeper into debt. Bringing your financial history to light is the very first step toward financial freedom. Now, you can tackle your finances in the proper order and create the most profitable budget.

But, first, before diving into evaluating your finances, I highly suggest listing your financial goals first. It can be easy to limit our goals when we are thinking of our current financial status. We must know our “why” before we tackle the “how” in order to keep us motivated throughout our journey to financial freedom. So, if you haven’t already, you must review your financial goals over your lifetime. We covered personal financial goals you must make for yourself in your lifetime here, for your marriage here, and for your children here. After listing your lifetime goals, we can determine which of those goals we can accomplish this year. We also covered how to maximize your income here. If you haven’t downloaded your free budget template yet, you can do so here now and create a budget for this entire year!

How to Gather Your Financial History

We are gathering your financial history over the previous year so that we can properly estimate your budget for this year.

Bank Account & Credit Card History

Depending on your preference, there are three methods you can utilize in order to gather your bank(s) statement history and your credit card(s) statement history over the previous year:

1. Download your statements to your preferred device.
2. Download and print your statements.
3. Export your statements to excel.

The methods to utilize above will depend on your preference for reviewing your financial history and the options provided for download and export from your bank and credit card companies. Today, you will simply focus on gathering this info from every single bank account and credit card account you used over the previous year and any accounts that you may not have used but carry a balance from previous years. Throughout the next week, we are breaking down what you have spent in each category of expenses and we will eventually compare debt payoff methods to find the one which will determine how to pay off your debt as quickly as possible with the least amount of finance charges.

Student Loan Debt

Depending on what stage you or your children are in school, your student loan debt could be sitting with different lenders as they can be transferred during different stages of schooling. If you have not reviewed your student loan debt at all and have no idea how to obtain your info, you can start by contacting the Financial Aid department of your college(s). They will then refer you to your lenders. Then, your lenders can confirm where your loans are sitting.

Once you have gathered all your current lenders, you will then access your financial history much like you do your bank and credit card history as noted in the previous section above. Today, you will simply focus on gathering this info from your lenders. Throughout next week, we will break down what you owe and will eventually compare debt payoff methods to find the one which will determine how to pay off your debt as quickly as possible with the least amount of finance charges.

Mortgage & Auto Loan Debt

One key thing you want to obtain today regarding mortgage and auto loan debt is to be aware of how many payments you have remaining on each of your loan(s). This number is essential for calculating how to pay off your debt as quickly as possible with the least amount of finance charges. You will simply send a quick message to your lender(s) and obtain that number along with your APR(s) (interest rate(s)).

And that’s day five of our budgeting challenge! Hopefully, by next week, you will have received all responses to any inquiries you have made regarding gathering the info noted above. Continue to gather any info you can over the weekend, if necessary. Enjoy the next two days or use them for catching up on the previous tasks (the next two days count as days six and seven)! Day eight continues below.

Evaluating Your Financial History

Now that we have gathered our financial history, we can break it all down over this week in order to properly estimate your budget for this year. If you haven’t already, please take the time to continue reviewing all of your goals we previously covered. Remember, as I stated in this video below, it is important to list our lifetime financial goals so we can focus on accomplishing what we can this year. While we took this time to focus on the “why” we are creating a budget, now, we now begin to go into detail about the “how” regarding accomplishing our financial goals.

So, grab your budgeting template here now, if you haven’t already, and let’s start gathering your financial history so we can evaluate your regular and miscellaneous expenses and properly estimate your budget for this year! We are working on the “Expenses” tab for the previous year.

Utilities & Cell Phones

For today’s challenge, we are focusing on gathering your financial history for the following categories:

• Gas & Electric
• Water & Trash
• Internet & Cable
• Cell Phone(s)

For any utilities you have that are not listed above, you can add them to the “Expenses” tab for the previous year starting with row 13. You can overwrite the info in the cell noted “Other (click this cell and add the name of your expense).”

In Column C, under “Due Date” and next to “When is this payment due?:”, you will note the due dates of each of these payments. These will come in SUPER handy when I share my lifetime budgeting system here. It is so important to set up your budget according to when your income hits your account and when your bills are due in order to ensure you are never overdrawn in your account. So, stay tuned for my lifetime budgeting system which I will share here.

Now, you will enter what you have paid for each of your utilities and cell phone(s) for each month under Columns E through P noted “January”, “February”, etc.

And that’s day eight of our budgeting challenge! Day nine continues below.

Insurances

For today’s challenge, we are focusing on gathering your financial history for the following categories:

• Health Insurance
• Dental Insurance
• Vision Insurance
• Life insurance
• Homeowner’s Insurance
• Auto Insurance

For any insurance costs you have that are not listed above, you can add them to the “Expenses” tab for the previous year starting with row 13. You can overwrite the info in the cell noted “Other (click this cell and add the name of your expense).”

In Column C, under “Due Date” and next to “When is this payment due?:”, you will note the due dates of each of these payments. These will come in SUPER handy when I share my lifetime budgeting system here. It is so important to set up your budget according to when your income hits your account and when your bills are due in order to ensure you are never overdrawn in your account. Some insurance bills are not consistently paid monthly. Some are due for only certain months out of the year. And some offer a discount for paying once a year. So, stay tuned for my lifetime budgeting system masterclass which I will share here so that you can know how to ensure you have enough in your account when it comes time for larger insurance bills to be paid at different times of the year and take advantage of discounts offered for paying annually.

Now, you will enter what you have paid for each of your insurances for each month under Columns E through P noted “January”, “February”, etc.

We will be covering how to estimate these required expenses for this year and how to reduce them here so stay tuned for that! For now, simply gather your financial history for the categories listed above and we will continue collecting your financial history throughout this week in order to properly estimate your expenses for your budget this year!

And that’s day nine of our budgeting challenge! Day ten continues below.

Groceries, Gas, & Transportation

For today’s challenge, we are focusing on gathering your financial history for the following categories:

• Gas / Travel
• Groceries

For any similar costs you have that are not listed above, you can add them to the “Expenses” tab for the previous year starting with row 13. You can overwrite the info in the cell noted “Other (click this cell and add the name of your expense).” You can add things like “dining out” or special transportation costs like “flights” for trips which you may consistently make every holiday season, for example.

In Column C, under “Due Date” and next to “When is this payment due?:”, you will note the due dates of each of these payments which require a due date like monthly bus or train passes or grocery subscription services. These due dates will come in SUPER handy when I share my lifetime budgeting system here. It is so important to set up your budget according to when your income hits your account and when your bills are due in order to ensure you are never overdrawn in your account.

Now, you will enter what you have paid for each of these categories for each month under Columns E through P noted “January”, “February”, etc. We will be covering how to estimate these costs for this year and how to reduce them here so stay tuned for that! For now, simply gather your financial history for the categories listed above and we will continue collecting your financial history throughout this week in order to properly estimate your expenses for your budget this year!

And that’s day ten of our budgeting challenge! Day eleven continues below.

Miscellaneous

For today’s challenge, we are focusing on gathering your financial history for any miscellaneous payments like the following:

• Auto registration fees
• Sports for you and/or your kids
• Gym memberships
• Clothing, shoes, and accessories
• Gifts
• Birthday parties

For any costs you have that are not listed above, you can add them to the “Expenses” tab for the previous year starting with row 13. You can overwrite the info in the cell noted “Other (click this cell and add the name of your expense).”

In Column C, under “Due Date” and next to “When is this payment due?:”, you will note the due dates of each of these payments which require a due date. For birthday parties and gifts, you can add the date of the loved one’s birthday or anniversary. These due dates will come in SUPER handy when I share my lifetime budgeting system here. It is so important to set up your budget according to when your income hits your account and when your bills are due in order to ensure you are never overdrawn in your account. So, stay tuned for my lifetime budgeting system which I will share here so that you can know how to ensure you have enough in your account when it comes time for larger bills to be paid at different times of the year and take advantage of discounts offered for paying annually.

Now, you will enter what you have paid for each of these items for each month under Columns E through P noted “January”, “February”, etc. We will be covering how to estimate these costs for this year and how to reduce them here so stay tuned for that! For now, simply gather your financial history for the categories listed above and we will continue collecting your financial history throughout this week in order to properly estimate your expenses for your budget this year!

We are gearing up to get you into some budgeting habits that EVERYONE must know and practice in order to have the best budget setup ever. So I highly recommend watching the video above to familiarize yourself with some habits you should get used to now so you can be properly prepared for how to begin to create a budget!

And that’s day eleven of our budgeting challenge! Day twelve continues below.

Estimating Your Expenses for Your Budget This Year

Now that we have gathered your financial history for the categories listed above, we can properly estimate your expenses for your budget this year! So, grab your budgeting template here now, if you haven’t already, and let’s start creating your budget for this year! We are working on the “Expenses” tab for this year.

For any bills with due dates, you can simply copy them from your “Expenses” tab for the previous year and paste them to your “Expenses” tab for this year. Update the dates for any bills that have changed. Leave them blank for any bills that you will not continue to pay this year or any bills that do not have a due date.

Now, you will enter what you estimate you will pay for each of these categories for each month under Columns E through P noted “January”, “February”, etc. You will make adjustments for any expenses that will change this year. Some examples of some possible changes for this year may include:

• Possibly paying more or less for utilities if you are working from home or returning to the office
• Possibly paying more or less for travel if you are working from home or returning to the office or your kids are attending school at home or returning to school
• Possibly reducing or increasing health insurance costs by removing your older kids who have become independent adults or adding your newborn onto your plan

Take time today and throughout this weekend to evaluate how your expenses will change from last year to this year so that we can properly create your budget for this year. After you complete your “Expenses” tab for this year, you will notice the “budget” tab on your budgeting template has been automatically updated. Things are coming together! Why are the numbers in the “Balance” column red? You will want to watch the video above to understand the very important reason why.

In order to know how to begin to create a budget and how to truly maximize your income and accomplish your financial goals, you must create a budget for your income now in order to use it in the most profitable way possible. So, if you haven’t downloaded your free budget template yet, you can do so here now and create a budget for this entire year!

Remember, after you create your budget for this year, I show you how it all comes together in a comprehensive lifetime budget that takes minutes a day to maintain.

In the next post, we calculate how to quickly pay off your mortgage (and how to determine if that makes sense for you) and how to calculate how much home you can afford if you aren’t a home owner.

Happy Budgeting!