Creating your First Budget

The Broke Bajan
Oct 15, 2019
2 min read

Updated: Oct 21, 2019

Creating your very first budget may seem like a daunting task, but it's easier than it looks. Here is step by step guide to starting your first budget. Start by getting a pen and paper and writing everything down.

Income

At the top of your page, start by writing down your net income for the month. This is the total amount of all your money after taxes like NIS payments or PAYE tax have been taken out. This is different from your gross income, as the latter is your pre-tax income.

Don't only put income from just your job, if you have any other side jobs, revenue from your own business, any gift money, or any other source of income, no matter how small, also write it down. Put them all together and your total is the amount of money that you are working with for the month.

Fixed Expenses

Next let's get the essentials out of the way. Note all of your monthly bills, subscriptions, rent, insurance payments, debt payments or any payment that comes regularly at around the same price. Now, subtract those from your total and what's left is for your variable expenses.

Variable Expenses

These are things that you buy where they fluctuate month to month. These can include money for clothes, groceries, gas and car maintenance and even going out. Write down the following categories for them:

Savings
Transportation
Food
Other Living Expenses - buying clothes, eating out, school supplies etc
Giving
Entertainment

Decide how much money you will be allocating to each of these out of the rest of your money. Remember that every dollar that you have is a soldier in your army, and every soldier needs a task. You should already know your current spending habits after reading our first post. Use them as a guide while calculating your budget.

Make sure that the amount that you place towards things like food and transportation is realistic, as many underestimate how much they really need.

Also note that every extra dollar you spend on more non-essentials like entertainment, is a dollar your taking away from your necessities.

At the end, add everything up and make sure that everything adds back to your net income. Your budget should not be over or under your net income.

Congratulations, you've done it. You've finished your first budget. Start following it religiously, but don't forget that it should shift at least slightly every month to six months, based on changes in your life. But with this, you will reach your financial goals.

If the pen and paper doesn't work for you there are tons of other ways to do it. Try budget jars, Microsoft Excel spreadsheets are any apps to help the process become easier.