A budget is a great tool to help you track your expenses so you have a better control over your finances. You may think, what difference will it make with a budget? Will I be really able to save anything with a budget? Well, guess what, I have been using the following budget for my family for the last 17 years that gave us the freedom to live without paying any debt or interest while saving for the future, alhamdulillah.
The goal of a budget is to spend less than you make so you can start saving for the future and for any emergencies. My initial saving plan was to save $1,200 for an emergency fund when we lived on a $200 budget. You want to come up with a realistic number to keep you motivated about saving.
So how do you make your budget work for you? I use a notebook to create my budget (see above link). Every year I write down all the categories for my budget in that notebook. A composition book is fine as well. The categories change from year to year, for example, we don’t have a diaper category anymore ;). Once writing down the categories is taken care of, I take a piece of paper and start adding my monthly expenses under every category I had added. I stick it to my fridge for easy access.
This is a sample monthly budget for a family of 4-
Prescription medicine- $7
Categories are different for every family. You want to make your own categories that works for your family. You add all your expenses from all the categories at the end of the month. You want this number to be less than your income.
If you follow these steps, you will know how much you make and how much you spend for the first month after you’d created your budget. This is the time when you want decide how much you want to save every month.
And this decision will help you make an effective budget, knowing where your money goes and where you want them to be.
When you know how much you want to save every month you can cut back on expenses in certain categories or remove an entire category. For example you can reduce certain expenses in the Grocery category and remove the category Netflix from your monthly budget.
Once you decide what’s your necessary expenses (food, rent etc.) and what’s your discretionary expenses (eating out, monthly subscriptions etc.) expenses, you will have a much better control over your finances.
I hope you are able to save with the budget that you have created insha Allah. Please keep in mind that no amount is too small. If you can save $5/month, you will have $60 at the end of the year. A small step towards your budget can make a big difference later.
Feel free to reach out to me with your budget questions.