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You earn quite well, you don't squander money at all, and yet - again you haven't managed to save anything. Do you sometimes have "too much month at the end of money"? You're only halfway through the month and there are only meager remnants of your paycheck. Where did those go? all the money? In this article, I will show you how to finally take control of your finances. I will also share with you an effective tool that will help you take the first step towards improving your finances.
My name is Ania Mączka and I have been supporting Marcin as part of the FBO Team for 5 years. In this article, I would like to share with you 3 steps to creating a household budget . This is the magic tool that will help you take control of your own finances and you will be the one to say their money what to do instead of wondering where it went. Why am I the one to tackle this topic? I share the reason in this video:
Just a few years ago, before I met Marcin, my personal finances were a complete mess. Although I earned quite a decent salary, I was always “down to zero” at the end of the month. On top of that, my current husband, then fiancé, was paying off a consumer loan. We had big dreams – a wedding and a small wedding reception, travel, home renovation… I could go on and on. What good is it if all you hear in your bank account every month is the chirping of crickets? I started frantically looking for a way to take control of my finances and get them in order. I found Marcin's posts about the household budget and I decided to give this tool a chance. Now I can't imagine my finances without a budget, but believe me, it wasn't love at first sight.
I know that the topic of budgeting can seem extremely complicated and very tiring. I had that feeling myself when I was just starting to delve into the subject. But, you know what? To create your first household budget, you only need 3 steps. Before I tell you what those steps are – let’s start from the beginning. What is a household budget and why is it worth trying to keep one? We’ll also dispel one of the biggest budgeting myths.
A household budget is a WRITTEN plan for your money. It is a map that will guide you to your destination. The purpose of your journey is, of course, to improve your financial situation. To get from where you are to where you want your finances to be, you need a map , which you will look at during the journey. All this so that you do not lose your way and reach your destination calmly. The point of budgeting is that instead of drifting from expense to expense , you determine in advance what amounts you WANT to allocate to specific categories of expenses and Over the course of a month, you monitor whether you are sticking to these assumptions .
Interestingly, many people think that budgeting is about writing down expenses. And this is one of the biggest myths about budgeting. Collecting receipts and writing down expenses is just ONE element of budgeting – important, but honestly, not the most important. Writing down receipts , is driving a car, looking only in the rear-view mirror. Although you will inevitably look at it while driving, it is not the most important thing on a journey. To get somewhere (especially to places you have not been before - for example, in a country of very high value netto) you will need a map, a clean windshield and a good travel plan. And that is all a household budget is.
Why bother with budgeting at all? It's simple. When you work, you sacrifice your time - your precious life, really - to earn money. A budget is a tool that will make sure you spend that money according to your values and what you care about the most. Thanks to him, you don't spread your life thin and don't spend money on crap that you don't need.
How would you feel if your employer offered to pay you in unnecessary junk that's lying around in your basement or closet instead of money? It sounds absurd, doesn't it? You definitely wouldn't agree! So don't agree to thoughtlessly spending your hard-earned money. money. Create a budget and tell your money where to go instead of wondering where it went at the end of the month . Now I'll show you how to do it in practice.
It's actually easier than you think. Believe it or not, you're 3 steps away from the first month in which you'll be in control of your own finances. What are those steps? I'll tell you now:
Later in the article, we will discuss what exactly needs to be done in each step.
We start with the first step, PREPARATION. Before you start setting amounts and creating your first budget, you will need a little reconnaissance . Preparing your backpack and car. Don't worry, this step won't be too time-consuming. You need 3 things.
First, you need to know how much fuel you have. I think you'll agree with me that it's hard to get going without it. The equivalent of fuel is of course your money. Or more precisely - how much money you have at your disposal NOW . Let's assume it's the end of the previous month and you start preparing a budget for the following month. Check how much money you have at a given moment: in your wallet, in your pocket, in your bank account, etc. If you have PLN 2,500 in your account and PLN 500 in your wallet, it means that you have PLN 3,000 at your disposal. It doesn't matter how much you'll get in a month, or when you'll get your next transfer. That is, to stick to our metaphor - when you stop at another gas station on your route. We'll start with what you have NOW. If you get more income over the course of a month, you'll easily replenish budget for these funds as they become available.
Secondly, you need to determine which cities you want to visit along the way. That is, what expenses you need to and want to cover during the month. Therefore, a very important element of preparing a budget is to determine the categories of expenses that you incur and the approximate amounts that you allocate for them . Of course – the expense expenses are not equal. It is the same in travel – some cities are a mandatory point, others – completely optional. It is the latter that gives your trip flavor. And it is the same in expenses. Some of them are our needs – i.e. expenses that you have to bear, to have a roof over your head, a full belly and debts paid. Other expenses are whims . That is, things and amenities that you can do without. But we know - it is our whims that add flavor to life. That is why it is definitely worth including them in our plan.
When preparing your budget, DETERMINE which expenses are absolutely necessary (your needs) and how much you need to spend on them . Then, determine the categories of your wants and the approximate amounts you currently spend on them. You can do this by looking at your bank account, or by doing a monthly experiment – writing down all your expenses and adding up the amounts in specific categories at the end of the month. If a month is too long for you – write down your expenses for 2 weeks and make some assumptions – e.g. if you spent 400 PLN on food in 2 weeks , over the course of a month it will be approximately PLN 800.
This stage of preparation ends with a ready list of your spending categories – you have them sorted from most important to least important and you know approximately how much you spend on these categories NOW.
What else will you need to be able to make our budget trip? Choosing a means of transport!
Just like in life. You can go on a trip by car, on a motorbike, or even - by bike. The equivalent of this choice in budgeting is determining what you will create your first budget in. There are several options - if you have the drive, a lot of time and patience, you can simply do it on paper (this would be the equivalent of a bicycle). If you like spreadsheets, you can create your budget in Excel or Google Sheets. And if neither of those options sound good, you can try one of dozens of budgeting apps.
What is most important when choosing a budgeting method? First of all, your personal preferences. The tool must be tailored to you. If you get a fever just looking at Excel, then maybe keeping a budget in it will not be the best solution for you. That was the case for me – because at work I worked a lot on Excel, the thought of opening it later in my free time to manage my budget gave me shivers! Everything changed when I started managing my budget in a phone app – the whole system was much more pleasant and it was easier for me to stick to it resolution. Just remember not to get too hung up on which tool to use. That's really secondary. If you don't have a preference, start with Excel, and once you've done your first few budgets, try other apps.
If you chose Excel, I have a surprise for you – Kasia has prepared a special budgeting file that will help you take action:
That's it for preparations. We have our vehicle, fuel, and an outline of the cities we'd like to visit. Time to roll up our sleeves and plot our exact route.
We are moving on to the second step, in which we will CREATE our BUDGET and live with it for the whole month. As you probably remember, a household budget is a WRITTEN plan for your money. And exactly: “written down” is the KEY to success in our second step. We will also draw from the previous step – our preparations.
We start by planning the exact route of our trip. In the previous step we determined which points we want to visit, now we need to check if we have enough fuel to visit all these places. In other words – we move on to creating our budget. In practice, it is simply about assign a very specific task to each zloty that you have at your disposal. Imagine that each zloty is your employee, to whom you have to assign a job to do. A group of employees will take care of the bills, others will take care of the apartment fees, and still others - food. When making a household budget " We “spend” our money on paper (or in an app) before the month even starts.
At this stage, you will use the list of spending categories created in the first step. Review it carefully and determine what your budget will look like. First, budget money for the most important things (bills, loan installments, food), and only then for the rest. Thanks to this you will know exactly what you can afford and which expenses must wait for better times or for a new inflow to the account. The point is that when we spend money on paper, we start by covering our most important expenses and at some point we will run out of money , we are sure that we will pay for the most important needs, and there will be no money left for whims. When you plan on paper and something does not fit - it is a clear sign that you need to make changes to the budget. And that is what it is all about.
I don't know if you caught this, so I'll repeat it again: in this step, EVERY złoty must be given a specific task to perform. This means that the sum of the planned installments, expenses and savings must be EQUAL to the sum of funds you have. When the money is transferred to your account additional funds – you can easily add them to your budget and decide which expenses you will cover from them.
And great – we have a plan ready, so let's hit the road! The second stage of this step is checking whether we are sticking to our plan, i.e. the established budget. How often should we look at the map? So often that we don't get lost! Only at this stage do we move on to writing down expenses. This is nothing more than checking off on our travel plan the attractions we have already visited.
It is at this stage that many people give up, because it requires a certain systematicity. My advice to you is this – write down receipts, preferably right after leaving the store or after making a transaction. Additionally, set a reminder on your phone, which will go off every day, e.g. . around 8:00 PM and will remind you to write down the transactions you have made. If you happen to neglect this habit - DON'T LET IT GO! Get back into the game as soon as possible and try to recreate the transactions as accurately as possible based on the history of the account and, for example, your mail, where you can find some online shopping.
Don't worry if you don't get to all your expenses. Just make your own assumptions, or create a new category in your budget: "I don't know what it went to." In my budget, I have 200 PLN for such strange expenses every month. That's my buffer. , which I often allocate to other categories at the end of the month. I encourage you to create such a category for yourself. Now you may be thinking: "But how? How can I create a new category during the month within an already established budget?". YOU CAN! You have my full permission and support in this matter. There is one condition: the total expenses in a month cannot exceed your earnings. The number of times we move money between categories during the month does not matter. Your employees have simply received a new task.
Shifting money between categories is a natural part of budgeting and the last part of our second step. It's about making informed decisions about your budget. Just like when you're on a road trip, you sometimes decide not to visit a certain place because a more important one has come up, the same goes for budget – when an additional expense appears during the month, you determine whether to include it in the budget and from which category you can cover it. If new income has appeared in your budget during the month (for example, a bonus payment or 100 PLN found on the street) – As soon as you receive them, decide what you will spend them on.
EVERY penny must have its purpose. Remember that if in such a situation you feel good with your current budget and do not need any more whims, it is always a good idea to allocate additional funds to increase your savings.
Okay – let's assume that everything went more or less as you planned and YOU REACHED YOUR DESTINATION! You kept a budget for the whole month. I hope that after a month you will see the first effects – I remember my surprise perfectly when after a month of conscientious budgeting I had a surplus at the end 400 PLN. I felt like I got a raise at work. I hope that your results will be similar or even better. But even if not - you can be proud of yourself for taking action with your finances throughout the month. It is this kind of action that will lead you to the magical land of high net worth. But let's not get too carried away, IT'S NOT OVER YET! Time to move on to step 3.
The route is done, it's time to sum it up. To make the next lap more enjoyable, we need to take a moment to analyze our fuel consumption, consider whether all the cities on the route were actually good stops, whether we didn't get a flat tire along the way and whether we got to where we planned . What else? This step is the moment when we decide whether we want to change anything in the plan for the next month. So after the budget is done, we summarize and draw conclusions from the past month. And this is the secret sauce of budgeting, so whatever happens – do not give up on this stage!
I have 3 elements for you to consider in this step:
And finally, thirdly – create a budget for the next month. Take into account all the conclusions from the first approach. If any category of expenses has spectacularly fallen apart and it may be similar in the next month – increase it. If after a week you have a crisis of writing down expenses – set yourself during this time, additional reminders and motivators. Anything that will help you act for the next month.
And that's really ALL. These are 3 steps that will help you go from money slipping through your fingers to taking responsibility for your finances. And now the ball lands in your hands. Download Excel for budgeting: DOWNLOAD EXCEL HOME BUDGET
and try to make your first budget. It doesn't have to be perfect. The important thing is to take the bull by the horns, start acting and take that first step. If you encounter any problems - IT'S NORMAL. Leave a comment and we'll try to help you. I'm keeping my fingers crossed for you and I'm waiting to hear how it went for you.
Finally, a quick tutorial of the budgeting file. When you open the file, you will see that it has tabs at the bottom:
3. You can enter additional revenues in the “Additional revenue budget” table:
4. In the table: “Expense budget” plan your budget. For your convenience, you will find the most common expense categories in the file. Scroll down the sheet to add additional expense categories.
5. List your expenses – on the right side of the budget you have space to list the amounts of your expenses in different categories throughout the month:
6. In the last tab you will find a SUMMARY – you will see at a glance how much you spent in each category in a given month of the year.
