Whether you have started apartment hunting for your first rental or are planning and saving for your next summer getaway, your decision will all come down to one thing: Money.
Unfortunately for many of us, the world does not run on a Monopoly board, and we don’t get an extra $200 for passing GO (although it would be nice). Tracking your finances for the first time can be overwhelming, but we’re here to help you tackle it one dice roll at a time.
From definitions to personal budget categories, follow along with our quick guide to making a 50/30/20 budget spreadsheet!
What is a Budget? (And Where Do I Start?)
Before we get to the ins and outs of building a budget, we’ve got to start with the basics.
What is a Budget?
A budget is, simply speaking, a form of financial planning for your money. It doesn’t aim to restrict your spending but gives you a plan for how to allocate what’s coming in and what’s going out.
Building a budget gives you control over your money, helping you accomplish goals and achieve the life of a Monopoly banker rather than a thimble.
What is the 50/30/20 Budget?
If you have ventured down the rabbit hole of budgets and personal finance, you may have come across the 50/30/20 rule. This rule provides a simple framework to start your budget journey, allocating funds in the following way:
- 50% of your income for needs, such as housing, utilities, and insurance
- 30% of your income to wants, such as eating out or monthly subscription services (thanks Netflix)
- 20% will round out your savings and debt, such as starting an emergency fund and paying off any outstanding debt
How to Make a Budget (Including a Budget Categories List!)
Step One: Calculating Your Net Income
Net income is your take-home pay – the realistic amount of income you have coming in after taxes, retirement plan deductions, and health insurance. If you are on a salary, focus on your last several paystubs to determine how much money you can use.
If you are a freelancer or self-employed, calculate your average income over the past three to six months. Due to the irregularity of your income stream, keep detailed notes of contracts and pay. Consider setting aside a certain percentage for taxes and calculate your realistic monthly income.
Step Two: “Where is My Money Going?” Breaking Down Monthly Expenses
This stage is where the fun truly begins, complete with personal budget categories and color-coded spreadsheet tables.
Start by listing out your fixed expenses, or regular monthly bills. Examples of fixed expenses include:
- Rent or mortgage payments
- Car payments
- Minimum loan payments
- Insurance premiums
- Utility bills
Next, list out your variable expenses, or those that change from month to month. Examples of variable expenses include:
- Groceries
- Gas
- Entertainment
- Dining out
Record monthly expenses however you see fit – we recommend building a budget spreadsheet on Google Sheets or Excel for ease!
Step Three: Start Setting Realistic Goals!
You most likely started looking into building and establishing a budget because of short- or long-term financial goals, such as saving to buy your first house or paying down your student loan debt. Either way, setting realistic goals will help motivate you to stick to your budget, save money, and achieve financial freedom!
Step Four: Divide and Conquer
This is the moment where all the lists and goals come together to form a plan of attacking your finances head-on!
When building your table of needs, set aside fifty percent of your monthly net income. Break it down even further by setting realistic spending limits in each category. Expenses in the “needs” category will most likely include rent, gas, groceries, etc.
Next will be your table of wants, which will be thirty percent of your monthly net income. Think of this table as your “fun” money. It will include expenses such as streaming services, shopping, dining out, etc.
The final table will be for building your savings or debt repayment. The final twenty percent of your monthly income will go towards saving for a retirement account or paying down that pesky credit card debt.
Step Five: Track and Stick to the Budget
The final step is the hardest part of your budget because it requires you to stay on top of and stick to the budget you’ve designed for yourself.
Keep in mind that your budget is designed for you, so if certain spending limits aren’t serving you or your goals have changed, just adjust it! Adjusting your approach can help you manage your money more effectively and help you stick to your budget in the long run.
Key Takeaways on Building a Budget Spreadsheet
If you can’t bear to sit through all the steps of building your budget, we’ve got you covered. Here’s a quick recap of building a budget spreadsheet:
- Step One: Calculate monthly take-home income (after taxes and deductions)
- Step Two: Write out all monthly fixed and variable expenses
- Step Three: Set realistic short- and long-term goals
- Step Four: Separate monthly expenses into needs (50%), wants (30%), and savings (20%) categories–some math required!
- Step Five: Track your expenses and stick to the budget!
Your budget is designed for you and your specific wants, needs, and goals. Adjust accordingly and add a financial “buffer” for flexibility if you happen to spend a little extra on coffee that month.
The Bottom Line
Building a budget doesn’t have to be the scary monster hiding under your bed. With the right tools and know-how, preparing your finances for what’s ahead can give you the financial confidence to move forward and achieve financial freedom and stability!
Our team at Auto Money Title Loans believes in preparing for the unexpected and setting yourself up for financial stability and security.
Published March 2024
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Reviewed by Executive Team Member at Auto Money
Auto Money offers over 80 locations across the Southeast for individuals seeking extra cash for last-minute expenses like auto repairs, wedding costs, medical bills, and more. As title loan lenders, we practice transparency and compliance with codes and regulatory statutes presented by the SC Department of Consumer Affairs & SC Board of Financial Institutions, Consumer Finance Division.