Budgeting 101

Creating a monthly budget. Something that we all should be doing, something we have been told to do, and now something that we all can do! While doing this for the first time can be overwhelming, it is like many other challenges where after the first time the task at hand becomes much easier!

Let’s jump right into it.

According to a recent Pew study, 46% of Americans spend more money each month than they make. If this is the situation that you also find yourself in, you are not alone. With that said, a similar percentage of Americans also say they use and stick to their monthly budget (HFCU). Creating your very first monthly budget, or refining it to help you reach your financial goals is a great idea and we are here to help.

Creating an easy, simple, efficient budget is a must. Here are some key points to focus on:

  1. Don’t focus on the past. What is happening right now and in your near, predictable future is most important. The past is what we call a sunk cost and you can’t change the past so don’t dwell on it.
  2. Round up to the nearest $10. It simplifies everything. The extra $0.45 on your electric bill can be made much easier on you, especially when thinking in terms of an entire month.
  3. Don’t get discouraged. It might be tough at first, but with a little bit of time and dedication each month your budget will bring peace of mind and real, tangible benefits.
  4. Be 90% accurate your first time. This would have brought you an A in grade school, so why not now? Simply revise your budget month to month, learning and adjusting to reach your goals.

From here, you will learn a 30,000-ft. overview of the best methods to creating your very own personal budget, detailed much further in our full Brainy Money Budgeting 101 course. A lot of time went into this course and spreadsheet with the most important aspects being functionality, approachability and efficiency. You will be able to create a detailed monthly budget and easily visualize what you need to in order to learn best.

For now, we will cover:

  • Your net worth.
  • What you spend money on each month.
  • How you create your monthly income, and how much.
  • Monthly net income

The first step in creating your personal budget: Establish your net worth.

Think through all your assets. These include anything you own that holds a lot of your value! Your home, cars, savings and checking accounts, 401k as well as other miscellaneous assets. After this, input all your liabilities, including your mortgage, student loans, vehicle loans, credit card debts, and any other liabilities relating to your listed assets.

At this point you are already ⅕ of the way through your personal budget, congrats! Next is realizing what you spend your money on month to month. Think through anything and everything that costs you that hard earned money. Did Spotify recently yank that student discount right out from under you? Old boyfriend change his Netflix password and you finally have to make your own account? Whatever it is that could represent an expense, make sure you account for it.

One thing to keep in the back of your mind during this portion of creating your monthly budget is a high level of self-awareness. Fooling yourself about monthly expenditures can be rewarding in the short term of this exercise by seeing a nice positive net income value, but overall this will only hurt, or completely prevent you from reaching your goals. Make sure an appropriate amount of time is dedicated to thinking this through as it will be very beneficial month to month.

Next Step: Categories of monthly income

Most individuals receive most of their monthly income from a paycheck but will not keep track of, or realize, that they really do have other ways of making their money.

This includes a side hustle (not keeping track of), interest or dividends (not realized), and anything else that brings a buck to your account.

Now into the nitty gritty: keeping track of your actual daily expenses and income. While you might have a relatively good idea of what you are spending money on, there are of course differences month to month from what we thought would happen and what actually occurred. Your dog gets a little hungrier from June to July or your car needs a new water pump in August (condolences…), etc. etc. The list can go on and on as to why a budget will vary, and it most likely will. This is perfectly normal and will help you refine certain areas of your budget.

While it is expected that expenses vary month to month, completing the same exercise for your monthly income is very important as well.

Finish tracking what your actual monthly income is and, voila! Your monthly expenses and incomes have been recorded and can now be compared to your prediction. At the end of each month, it will be a good idea to realize what your net income is. Within the Budgeting 101 spreadsheet this will be calculated and automatically update itself with each of your changes. Monthly net income is the difference between your total income and total expenses. A positive number means, in latent terms, you spend less money than you are making. A negative number means you are spending more money than you bring in.

Knowing your net income, and specifically what areas of your monthly budget impact it the most, will be extremely beneficial in reaching your financial goals. Altering some habits, be it ever so slightly, will help this value soon reach where you want it to be.

Being able to have each month pass and know that your personal financial situation is in check is a great feeling. The peace of mind, lower levels of stress and higher self-confidence will soon all be normal once your monthly budget is in place. Follow the link below to learn more about Brainy Money’s Budgeting 101 course and downloadable spreadsheet:


All of what we just covered will be discussed in even more detail and help guide you through creating your own monthly budget! Always remember to reach out at any step of the process for guidance and to check out our weekly live Q&A sessions, every Saturday, where we answer all your questions!

Related Posts

Prepare for the Holidays

Prepare for the Holidays

Photo by Ron Dauphin on Unsplash Now that Halloween is over, the Holiday Season is upon us! If you have...