Photo by Kelly Sikkema on Unsplash

Hey there Smart Money People,

Budgets are not as common as you might think. According to CNN, only 41% of Americans have a budget. That means 59% don’t. YIKES.

While there are “all the reasons” to do it, it can be intimidating to finally put pencil to paper and see where your hard earned cash is going. To help you embark on this very emotional journey, here are 3 things you can do to prepare for creating your first budget.

How do you start?

3 Things You Need to Do BEFORE You Create A Budget

  1. Get your paycheck and any other sources of income documentation
    1. Gather your actual paycheck stubs and see what your take-home pay is
    2. Gather any other sources of income. If they are irregular, collect 6 – 12 months to generate an average.
  2. Get 6 – 12 months of the expenses from paper bills, or electronic bills, bank statements and credit card statements, any documented record. Once you have these bills, add up and divide by the number of bills you used.

For example, if you gathered 6 months of electric bills, add them all up and divide by 6. This will give you a monthly average for electricity. Sometimes it will be more and sometimes it will be less. To plan as closely as possible, using the average is a good rule.

If you gather 12 months, add them all up and divide by 12. Utilities can fluctuate depending on the season and your personal preference for heating and cooling. The best way to budget is to average the bill over 12 months.


  • Housing (Rent or Mortgage)
  • Food (Groceries, Eating Out, Coffee)
  • Transportation
  • Insurance (Life, Health, Homeowners, Car)
  • Recreation (Entertainment, Travel)
  • Giving & Saving
  • Utilities (Water, Electric, Phone, Gas, Internet, Cable, Wireless)
  • Health (Medications, Co-Pays)
  • Personal

Another perk to this exercise is you get a front row seat of what you are spending for real. Not what you think you are spending but what you are actually spending. Very helpful.

3. Track your spending for a week or two. Grab a small spiral notebook and have it handy or you can use the notes app or Microsoft OneNote on your phone. The exercise is to write down what you buy and what you are doing when you make the purchase. Observe the behavior.

? Do you buy coffee in the afternoon because you hit that afternoon lull? Do you skip taking lunch because you woke up late and opt to grab something at the office?

? Do you swing by the mall on the way home from work just to check out the shoe sale in case there is a cute pair of booties for this weekend’s date night?

? Do you just need to grab a few more groceries, even though you could live out of your pantry for a month straight? Guilty.

These can be the gotcha’s in any budget and can add up quickly. Cha-ching.

The hardest part of any new habit is creating a new habit. It is hard to create a new habit until you spot the old, sabotaging habit when it rears its ugly head. Exercises like this will make you smart when it comes to making choices that support the life you want to have and the peace of mind you desire. Who doesn’t want to be smart? 🙌

You start where you start, but you can’t change where you’re going if you don’t change what is keeping you where you are.

The last thing I will say on this topic, it will get easier. To really get in the swing of budgeting it can take two to three months to work the kinks out.



Cheering in your corner always!

Your biggest fans,

Karen and Bill

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