If you've never made a personal budget before, it can be pretty intimidating, especially for couples combining finances for the first time. To decrease the tension and difficulty of making your first budget as a couple, take a step-by-step approach by setting your financial goals first, then creating plans to meet them. Using a simple spreadsheet program, you can create a budget that lets you forecast your income and expenses, set spending limits, save for a variety of goals and track and monitor your finances during the year.
Set Your Goals
The first step in making a budget is to set financial goals. Depending on your income and expenses, this might be as simple as making sure you spend less than you make, or more ambitious, such as saving for retirement, a home down payment, debt reduction, vacation, emergency fund or college tuition fund.
Choose Your Recording Method
Decide in what format you will keep your budget. For a less-sophisticated budgeting, you can use a paper and pencil to list your income and expense categories and fill them in as they occur each month. For a more robust document, use a simple spreadsheet program such as Microsoft Excel, or simple accounting programs such as Quickbooks or Quicken.
Gather Financial Documents
To help plan your spending and savings, use last year’s financial records to help guide you. Gather your credit card statements, checkbook, bank statements and any other money-related documents you have. While some of the documents might contain redundant expense information, such as a checkbook and a bank statement, one document may have more detail than another.
List Your Income
Write down all of your expected income sources for the year. Include salary, wages, tips, gifts, tax refund, interest, sales of personal goods and any other income you project for the year. List your income sources by month so you can project your cash flow. If you are expecting a large birthday or Christmas gift from the folks, it won’t be available to spend until those dates.
List Your Expenses
Write down all of your expected expenses for the year. Break them into three categories: fixed, variable and savings. Fixed expenses don’t change, such as your rent or car payment. Variable expenses change each month, such as your electric bill or groceries. If you can determine an accurate average for certain variable expenses, do so to help project your year-end spending in these categories. Include contributions to your 401(k), emergency fund, vacation and other savings goals as expenses to give yourself a picture of how much of the that money you see piling up in your bank account is really available for discretionary spending.
Create Your Formulas
Once you enter your income and expenses into your budget document, create different formulas to see how your budget helps you meet your goals. The most obvious formula is the total formula, which lets you see how much money you spend and how much income you bring in each month, and for the year. Add a formula that shows your average income and expenses each month to let you see whether you will meet your annual goals at your current rate of spending and earning. Multiplying your average monthly numbers by 12 lets you project where you will be at the end of the year if things keep going the way they are. Use formulas to tie your savings to a percentage of your net income after expenses. For example, you might want to budget 5 percent of any excess cash you have each month to a college tuition fund.
After you’ve created your budget document, entered your projected numbers and created your formulas, examine your budget to see how you’ll do this year and whether all of your projections pan out. Make adjustments to your goals if you see you have more cash than you thought, or if your expenses are too high to meet all of your desired savings goals.
Sam Ashe-Edmunds has been writing and lecturing for decades. He has worked in the corporate and nonprofit arenas as a C-Suite executive, serving on several nonprofit boards. He is an internationally traveled sport science writer and lecturer. He has been published in print publications such as Entrepreneur, Tennis, SI for Kids, Chicago Tribune, Sacramento Bee, and on websites such Smart-Healthy-Living.net, SmartyCents and Youthletic. Edmunds has a bachelor's degree in journalism.