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“I am so overwhelmed with my money, I don’t even know where to start.”
I hear this all of the time, because should you start with a budget? Start putting money in savings? Start paying extra to debt? Where do I even begin?
I GET IT.
When I first started budgeting, I was a full time bartender and ever piece of advice that I read told me that I needed to start by “Adding up my income, but if you have irregular income, then you should basically just guess the lowest amount that it could be.”
And that is where I stopped with budgeting for MONTHS because I had no idea how to predict my cash tips for a month and thus, I put off budgeting for probably a whole year. I knew how to take my income minus expenses, but I had no idea what my income was. I finally figured out a budgeting system that worked for me as a bartender and it didn’t involve predicting my income.
I am no longer a full time bartender, but I do still have wildly irregular income, so figuring out a budget was still a learning curve. I have an entire lesson about irregular income in my 7 Day Money Reset!
The first thing I recommend to most budget clients is to figure out their last 30 days of spending as best as possible. This is the first lesson in my 7 Day Money Reset and I talk about it in my How to Actually Stick to Your Budget because figuring out where you are starting at is so important to making changes moving forward.
How to Figure out Your Last 30 Days of Spending
1) Gather your spending transactions from the last 30 Days
I personally think the easiest way to do this is to log into your banks and download the transactions into an excel. This makes them so easy to sort and move around. But you can also do this by opening your bank account and writing out every transaction. If you have already been tracking your spending consistently, then you probably have a good idea of where your money is going.
2) Pick a few categories of spending
Here is where I think a lot of people make it too complicated. They try to categorize EVERYTHING into a bunch of individual categories rather than just picking a few overall. If I were you, I would start with these:
- Bills
- Food (could do groceries/restaurants)
- Extra Shopping
- Entertainment
- Debt Payment
- (If you have kids or pets, those could be a category too)
But I would mostly stop here. Don’t try to break everything down between household or groceries or needs or wants. Just totaling up these broad categories are going to give you a pretty good idea of where to start.
3) Categorize all of your transactions
Using the categories you picked in the second step, go through each transaction and decide where it fits. If you are doing this in excel, you can create a column where you put the category in. If you are doing it on paper, using different colored highlighters is a great way to separate them out.
4) Total up each category
After you have categorized them, you can get a total for each category. This is important to give yourself a place to start with your new budget. Often times we start a budget with just making up numbers that we think we can follow, and the get frustrated when we don’t stick to that budget. But if we start with what are are doing, we can make small adjustments to our budget and figure out where to make some changes easier.
5) Cut out or Cut Back
Once you have your totals, you can decide where you think you can realistically make cuts or what is going to be more the next month. Maybe you total up your restaurants and realize that you are going out way more than you thought and set a goal to cut back takeout to only one or two days a week. Remember these don’t have to be all or nothing changes. They can and should be small shifts.
This might be where you decide to do a No Spend Month for one month to give yourself a view of your spending.
This isn’t easy, but it is the best foundation
I will be the first to tell you that this process isn’t easy or fun. It can be very overwhelming, but starting with the numbers can help give you a realistic foundation instead of getting stuck in the cycle of unrealistic numbers.
I created my 7 Day Money Reset to take you through this process, and then create a full budget from there. The goal of the 7 Day Money Reset is to break down creating a budget and goals into 7 actionable steps and reduce the overwhelm of creating a budget and getting your finances in order. Start your 7 Day Money Reset HERE!
