In our previous step, you should have calculated your net income and created a list of prioritized bills separated by category.
Now it is time to start paying your bills!
Here’s where I am going to be kind of purposefully vague.
How you budget for your bills (weekly,monthly,yearly) is going to depend on your consistency of income. Ideally you will figure out your yearly expenses in each category and divide those up over 52 weeks. Then you can create a savings account (Read more about sinking funds here) and set aside the money every single week so that when it’s time to pay your property taxes/insurance/other yearly fees, you have been saving for that bill all year long.
However, this might not be realistic for some of you who earn money on commission or who have seasonal work. So you will need to figure out how you are going to do things and create your budget based on your particular circumstances.
Everyone is going to start from the top of their list and work their way down.
Sadly, you might find that you can’t make it to the bottom of your list! This means that your expenses are too high for your income and it’s time to cut things out (or get another job). You have already prioritized your expenses, so this should be simple (although it could be emotionally difficult), you just start cutting things out from the bottom and working your way up.
You might delightfully realize you DO have money left. This can go into savings! You can use this to start a vacation fund. Or a home improvement fund. If your bills are paid and you have money leftover, you SHOULD be saving this money if you have tallied up all of your expenses correctly.
Create your budget to balance at $0 after all bills are paid. This means YOU are in control of where every penny of your spending goes. Not a penny that comes in isn’t in a designated spot in your budget. Congratulations!
Onto the last step of budgeting!
Step 1: Decide Your Non Negotiables