9 Steps to Creating a Rockstar Budget

Not sure how to create a budget? Follow these 9 steps to organize your finances and manage your money.

Every budget should be a rockstar and it doesn't take a tour bus or a guitar to create one. Sometimes we just don't know where to start when it comes to sitting down and taking pen to paper (or keyboard to computer as the kids do nowadays!) to sort out our finances. If you're not sure how your money should be divided by percentage, start bycreating a budget using The 50/20/30 Rule.

If you still feel like the pennies are slipping through the cracks and you don't know why, then you've come to the right place. A rockstar budget is all about gaining a clear visual of where your money is going and how it can improve.

Are you ready to be a rockstar have a rockstar budget in 9 easy steps? Let's get started!

9 Steps to Create a Budget

Step 1: Separate your dependable and bonus incomes.

Potential Problem: The money you're counting on isn't dependable at all. 

In most cases you will have a very clear picture of your monthly income. People generally have a set salary or average number of hours they are scheduled to work every month.

But what if things were more complicated? Say you work as a freelancer (like me) and consider your income the "bonus" income (which is what my family does). How do you handle these flexible income streams?

Please remember that everyone's financial situation is different. But for the sake of this post, my general response is that you need to stop depending on any above average paychecks. I know, I know. Ouch. But I highly discourage you to include projected bonus income in your budget. Only write down the minimum amount you have consistently received for at least a year.

Step 2: Write down all of your expenses.

Potential Problem: Too many expenses slip through the cracks. 

Yes, I'm talking about that weekday Starbucks Cafe Latte we don't think costs very much. If you buy one every morning, Monday thru Friday, it could add up to over $800 a year! That's a clear example of money just slipping through the cracks.

Sit down for as long as you need and write down every expense you can think of. Don't leave anything out, even if you feel a little embarrassed or surprised. Facing the problem head on is the best cure for an unorganized budget.

Step 3: List all of your essentials.

Potential Problem: Your necessities aren't really necessities. 

When you list your necessities I want you to think of the items that give you the basic needs of life. If your car is the only way you can get to work and make a living, then a car payment is a necessity.

Look for any red flag "false necessities." And I give you permission to be a little hard on yourself! Netflix is not a necessity. Trust me, I agree that it feels like it is! But you could still feed, clothe, and house yourself without it so it doesn't belong in this category.

Step 4: List all of your non-essentials.

Potential Problem: All of your non-essentials are under a blanket "Fun Money" category. 

Now let's talk about the things you like to have, but don't need. In this category I list things like clothing allowances, Netflix subscriptions, restaurant outings, etc. I love Netflix but I don't need Netflix to survive.

Now take things a step further and dig through all of your credit card and bank statements. How often do you go to the movies or Happy Hour? Does the number of times have a pattern or a routine to it? Write everything down!

"Fun Money" should not be used to describe everything. If you know you pay for Netflix every month, then it should be marked as "Netflix Subscription." If you go to Happy Hour every Friday then it should be listed under "Happy Hour Fund." The key to a rockstar budget is to be very specific.

Step 5: Crunch some numbers.

Potential Problem: The calculator may become exhausted.  

Now is the time to feel uncomfortable. Once you have all of your income and expenses lined up, start crunching some numbers. Use a fancy calculator if it makes you feel better.

Add every cent of income and be certain to keep the dependable figures separate from the bonus/flexible figures. Now do the same for all of your expenses, keeping the essentials separate from the non-essentials.

Subtract the expenses from the income. What is the result? Is the number negative or positive?

Step 6: Evaluate the results.

Potential Problem: Your balance is negative or too low. 

Is your budget exactly where you want it to be? Hooray!

But if the number you came up with was negative or lower than you're comfortable with, then it's time to make some adjustments.

It's important not to beat yourself up too much at this moment. As disappointed you are with the result, you're not done. You're sitting here with me and trying to find a solution. You're already halfway there to making your budget look and work like a rockstar.

Step 7: Adjust the non-essentials.

Potential Problem: You can't adjust them any further. 

Let's start kicking some of the non-essentials to the curb. List 5 items you are willing to part with or change. Weekday Starbucks coffee, cable, magazine subscriptions, frequent restaurant outings, and Happy Hour are generally some of the first things that go. Invest in some reusable travel mugs and slap a grin on your face because it's going to make your bank account happy.

Crunch the numbers again. Still uncomfortable with the balance? Let's move to essentials.

Step 8: Adjust the essentials.

Potential Problem: You can't adjust them any further. 

Generally the first place to start is with groceries because this section has the most flexibility. Can you meal plan more? Is now the time to start Meatless Mondays? Are you utilizing all of your leftovers?

Keep crunching numbers and making adjustments until everything is stretched as far as it can go.

Still not happy? It's time to take a look at your income.

Step 9: Increase your income.

Potential Problem: You don't have the time to get another job. 

Ugh. Just seeing the heading for this part can be disheartening. I know you're thinking, "If my budget's not working then I have to add a part time job to my already full time one?" Not necessarily! (Although that's fantastic if you're willing and able to do so!)

There are only so many hours in the day and adding another job may not be the option for you. So how can you make some extra cash?

The sky's the limit when it comes to freelancing, turning your hobby into a business, Etsy shops, selling old items, throwing a yard sale, doing online surveys, selling all of your old books/movies, etc. I have a Pinterest board full of resources to help you get started! They won't make you rich but they might help. Just remember not to depend entirely on this form of income since it can be unreliable.

So what's included in a rockstar budget? It will contain enough information so that your finances are understandable, well-defined, and realistic. It's a budget you can refer to and count on so be sure to include all of the following elements:

  1. List of dependable income in a section of its own.
  2. List of minimum bonus/flexible income in a section of its own.
  3. Detailed list of expenses, separated into two categories:
    1. Essentials
    2. Non-Essentials
    3. Adjustments made as needed in the following order:
      1. Essentials
      2. Non-Essentials
      3. List of potential/used opportunities to earn additional income.

How do you create a budget that works for you? What do you do if your budget isn't working?