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If you want to improve your financial situation, you need to develop and live on a budget. By doing this, you are creating a detailed map that will guide you to financial freedom.
There are many helpful tools and options when it comes to creating your first budget. You can choose online tools like Mint, YNAB, Tiller, HoneyFi or even an excel template. Even writing down your first budget on a piece of paper is great start!
I’ve been using Mint for over 5 years and I’d highly recommend it. Here are some stand out features of Mint to mention right off the bat:
- It’s priced right … FREE
- Automatically syncs up with your accounts (bank, credit card, investments, etc).
- Convenient smartphone app lets you see your budget activity in real time
- Tracks your net worth so you can see your progress over time
Mint gives you the information you need to take control of your financial future. If you are interested in starting your first budget on Mint, here are 10 simple steps to get it done:
1. Sign Up for Free
Visit Mint.com and click “Sign Up Free”. Follow the prompts on the next couple of pages to choose your preferred email, create a secure password and confirm your location.
2. Link Your First Account
Link to your checking, savings, credit card and investment accounts. As an example pictured below, I’m going to link up to an American Express credit card account.
3. Link All of Your Accounts
Once you’ve linked up one account, be sure to link up all your other accounts by clicking on the “+Add Accounts” tab at the top of the page.
4. Define Your Budget Categories
Once all of your accounts are loaded in, click on “Budgets” in the menu at the top of the page.
In the budgets area, you will see that Mint has already begun placing your items into specific categories for you. Now some of these categories will be correct and some you’ll want to change to fit your preferences. Click “+Create a Budget” to begin creating your preferred categories.
Your income is a great place to start. Choose the “Income” category in the drop down menu “Choose a Category”. You’ll need to define the way you receive income (paycheck, dividends, business income), the frequency you get paid (monthly, every few months or once) and the amount.
5. Add Your Budget Necessities
After your income is set in Mint, start adding your expense categories in the same fashion as you did with the income. Start off with the important necessities like mortgage, rent, groceries, clothing and your individual utility bills.
6. Don’t Exceed Your Budget
As you start to add these important monthly categories, you’ll see the “You’ve Budgeted” section shows you how much you have left over. Don’t let that “Left Over” number turn red or you’ve already gone over budget!
7. Add Expenses That Align With Your Goals
Once you’ve added all of the important necessity expenses, start to add your expenses that are align with your dreams and goals for your future. This is when I’d recommend adding categories like savings, paying off debt and retirement investments. For example, let’s say you have a medical debt of $1,000 that has been weighing on you for years. With Mint, you can allocate $200 month for the next 5 months to pay that sucker off!
You’ll need to adjust other areas of your budget to ensure you have $200 free to pay off that debt, but that is where Mint really comes in handy!
8. Create a Zero-Based Budget
The goal at the end of the budgeting process is to have your “Left Over” amount equal ZERO. This way you are giving each of your dollars an assignment each month so they are working for you! This is called a “Zero-Based Budget”.
9. Reorganize Misplaced Expenses
Mint will do its best to categorize your expenses throughout the month. If Mint is unsure what category you’d prefer, it places those expenses in the “Everything Else” section at the bottom of the budget page.
When that happens, you’ll need to update the categories to fit in your budget. For example, I have a “taxi” expense from a Lyft ride that I took the other day that was not budgeted. If I’m using Lyft on a semi-frequent basis, then I’ll need to make sure I’m budgeting for that going forward.
10. Commit and Succeed
My wife and I get together on the first of each month to review our budgets. We choose the first of the month because Mint only allows you to budget for the month you’re actually in. For example, on February 1st we reviewed how we did in January and we also budgeted for the month of February. Set a date and time that works well for you and stick to it.
If you’ve never developed or lived on a budget before, you’re not going to get this right for the first couple of months. That’s okay! If you truly care about making a change in your finances, keep at it. From my experience, the time spent budgeting is totally worth it.
My wife and I had no idea what we were doing when we started budgeting together. Through a lot of trial and error and persistence we were able to pay off around $50,000 in debt in 1 year and we’ll have our mortgage paid off by the end of 2017. We are so proud of the progress we’ve made. We attribute this success to working together and staying on a monthly budget with Mint.
If you’re dig spreadsheets and the ability to modify your data easily, check out Tiller. Nicole and I are giving that program a whirl lately too.
How do you think monthly budgeting would help you succeed in your finances?