Things You'll Need:
- The worksheet you created in section one
- A willingness to live with less
- A savings account
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Step 1
Create spending categories. In a new worksheet, list your spending categories in vertical column A. These might include shelter, utilities, food, transportation, personal grooming, healthcare, entertainment, clothing, school and credit card payments. You get the idea. They can be anything you want, as long as they cover every expense category in your budget. Bold or underline the category names to make them stand out in your worksheet.
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Step 2
List all expenses. Under each category, insert a row for every single item you spend money on--be specific and list the items below the category headings. This may take some thought so take your time. Refer to your bank statements and bills if you can't remember everything.
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Step 3
Add up the amount you have spent on each item for the last year. Start with the previous month and work backwards 12 months. Divide the totals by 12 and write that number in the appropriate row, in column B. Title column B "Old." Insert a new row at the bottom of each category and sum up the items to create category subtotals.
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Step 4
Compare total spending to total after tax income. At the bottom of the page, add a row and sum up the category subtotals to come up with total spending. In the next cell down, write in your after tax income per month. In the next cell down, subtract spending from after tax income to calculate your monthly net savings or overage. Now you've set up your budget, you're ready to set limits and start saving.
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Step 1
Set a target spending limit. Let's say you want to save $5,000 per year. Subtract $5,000 from your after tax income and the result is your target spending budget.
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Step 2
Set targets for fixed expenses. Create a third column entitled "New" and copy over all formulas and income from column B. Walk your way down the list of spending items and identify those that are non-negotiable, like the mortgage. Budget those items first by writing in the fixed amounts under the "New" column.
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Step 3
Set targets for discretionary expenses. These will include items, such as clothing or entertainment, among many others. You decide which categories in your budget are most discretionary. If you need to cut spending, set lower targets in the "New" column vs. the "Old" column. Do you need that specialty coffee every morning? How about all those magazine subscriptions? Maybe it's time to cook at home more often.
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Step 4
Tweak budget worksheet until you reach your target spending budget. The fallout savings number should match the goal you set in step one of this section.
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Step 5
Track your progress. Skip a column and title column E as the current month. Track spending every month in a new column against your monthly spending targets. If you go over one month, cut back the next.
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Step 6
Set aside savings in a separate account. This forces you to own your spending habits. Every month that you see see this account grow, you will know without a shadow of a doubt that you are living within the budget you have created.
