Getting a car loan doesn't have to be a nightmare, even with bad credit.

How to Create a Healthy Budget for Your Car Loan

last updated May 2, 2018 by

Planning a budget for your car loan can often feel like a lot of unnecessary work. You may think that you instinctively understand how much money you can afford to spend every month – so why should you bother? But there are many benefits to managing your budget and carefully accounting for your car loan.

How to Create a Healthy Budget for Your Car Loan

By learning exactly what you are spending, you gain an understanding of areas where you can cut costs and increase savings. These savings will help you afford a more expensive car loan (which may be required if you need a car loan for bad credit) or will ensure that you can afford your car loan while paying off your other bills. It may also allow you to tighten up unnecessary spending – which will be useful to help you put some money aside which can allow you to buy your car outright.

  • One of the biggest benefits to putting together your personal budget is that it makes all of your spending habits visible. This will allow you to cut back on unnecessary areas and understand exactly what you can afford to spend.
  • Your personal budget will allow you to understand how to utilize your finances to pay down debts and put aside money for times of need.
  • If you are in financial difficulty, then a personal budget is vital for you to rebuild your finances. Your budget will help you find areas you can cut back on and allow you to resolve your problems and avoid getting into further debt.
  • Your personal budget will help get you into a position to find extra money in your pocket. This extra money can be saved for a rainy day, or you can put it on a deposit for your new vehicle.

One of the biggest problems for someone who has poor credit is getting into a position where they can improve their credit rating. Just getting by and paying your bills week to week will ensure you don’t get into a worse position, but it won’t do anything to improve your credit. The only way to ensure that you greatly improve your credit rating is to take out a new line of credit and pay it off. Poor credit car loans are certainly the best ways to improve your credit rating, as long as you keep up to date on your payments.

Planning a personal budget will put you in the perfect position to ensure that you improve your credit rating.

How to Create a Healthy Budget for Your Car Loan

Using Your Budget Planner

It is easy to use your personal budget planner as long as you follow our step by step guide.

  1. Download the Excel or Notebook file to log your monthly expenses.
  2. Follow our guide to fill in your different areas of expenditure. Then plan your expenses by dividing your income into the correct areas of your budget.
  3. Create a budget which will suit your lifestyle.
  4. Set yourself goals for debt reduction while keeping up to date with all of your monthly bills.
  5. Enjoy the benefits of a life free from unmanageable debt and uncontrolled spending thanks to your budget.

These steps are the first you will take to a much less stressful financial life. Your personal budget planner will allocate your income to needed areas of spending. As you begin to understand exactly where your money needs to go, this will help you move away from financial difficulty and bring control to your finances. You will soon be living a life free from money problems! A sound budget works in the following way:

  • Your budget is structured on a four-week month, with all bills being covered over those four weeks. This has a lot of extra benefits that will be outlined shortly.
  • The budget will help you understand exactly what you are spending each month so that you don’t have any little surprises!
  • This will help you build a life free from financial stress with extra money put aside at the end of every month.!

Your personal budget will put you in a position where you can feel free to spend your money as long as it is available in your budget. This is because you will know that any money you spend is coming from the correct area of your personal budget and isn’t being “borrowed” from other important expenses. If you want to spend money to go to a big sports game you can do so as long as there is money left over for you to spend in your “entertainment” account.

Your Budget Gives You “Free Weeks”

Most budgets work on a calendar monthly basis, but your personal budget is based on a four-week month rather than calendar months. This means that you end up with an extra “free week” once every 13 weeks. We call this a “free week,” because the money you have can be spent any way you wish. That extra cash can be used to pay down debts more quickly, to splurge on luxury items, or to boost your savings.

Your “free weeks” will be the first week of a month with five pay weeks. It is worth highlighting these weeks on your calendar because they will certainly become something you look forward to!

What Can Budgeting Do For You?

If you have ever known people who always seem to have money in their pockets and never seem to struggle financially, then you may have wondered how they do it. Some people may just have a higher income than you, but other people may make even less money than you – and chances are that those people with less income are following a budget.

Having a personal budget in place puts people in the enviable position of being able to use their paycheck on the things they want without worrying about their finances. Budgeting can put you into this same position of having money to spend without having to worry about falling short on your rent, mortgage, or other vital bills.

Step by Step Guide to Build Your Personal Budget

Now we’re going to guide you step by step through setting up your personal budget. You will be surprised just how easy it is to put this budget together and get yourself into a position where you can afford all of your expenses -including your new car payment!

Building Your Budget

The first thing for you to do is make sure that you can devote an hour of uninterrupted time to creating your budget. Everyone’s personal schedule is different, so find a time in your schedule where you can plan this in without any interruptions. Make sure that you have all the pertinent information pertaining to your income and expenses ready the day before you start. You will also need the following things:

  • A computer, smartphone, or tablet device with a spreadsheet program. If this is not possible, then you can do this manually with a binder, a pencil, and a calculator (although this is more difficult).
  • Your PDF worksheets from this website which can be downloaded and printed over and over again as many times as you like. You need: a copy of the Income/Expense worksheet, a copy of the basic “Monthly Budget” page, a number of copies of the Monthly Expense Category page to match the number of categories you have in your budget, and copies of the Deposit/Expense History page.
  • Your current bank balance in both your checking and savings accounts.
  • The amount of your monthly paycheck. If this is a fixed amount, just use the amount from your last week’s pay. If it varies, then take an average of your last four weeks.
  • The costs of all of your monthly bills. Make sure to include absolutely every bill that you need to pay. For example – phone, rent, utilities, clothing, transportation costs, and groceries.
  • Any fixed amounts can be simply written down, but for any bills that vary in cost, you will need to take a monthly average of the last 12 months.
  • Any yearly or quarterly bills can be worked out as a monthly cost by dividing by the number of months between each payment.
  • Feel free to estimate any costs that you have; however, if you are unsure, then it is better to round up to a higher number. It is better to find out that you have more money than to find out that you don’t have enough!

Income/Expense Sheet

The balances you have prepared are input into the Income/Expense sheet which works similar to the way that profit and loss sheets work for businesses. This allows you to work out how much money you have coming in each month and how much you have going out. If you are using this on your computer, then you simply need to download the Excel spreadsheet. You will need to print a PDF version if you are creating your budget on paper.

Start by using the income details that you have listed above to fill in the income boxes on the sheet. This sheet needs to include all sources of income – your pay, your partner’s pay, welfare checks, and child support. Once you have input all these sources of income, you need to total them and place the amount in the box at the bottom.

You then need to take all the outgoings and place them into the correct headings in the monthly expenses section. Make sure to include all payments – including those which you pay annually or quarterly. Remember that this budget is worked out on a monthly basis, to ensure that you divide all quarterly and annual payments by the number of months between each payment. Once again, you need to total all these amounts and add them to the monthly total box at the bottom.

The plan is for the totals of both the income and the expense sections to match, so any amount left over is added at the bottom line in the miscellaneous section. This allows you to know exactly how much surplus money you will have each month. This money can be saved to help you when there are certain months where areas of your budget fall a little short.

Basic Monthly Budget Sheet

Then take your Basic Monthly Budget sheet and list the categories you have placed on your Income/Expenses Sheet. This sheet allows you to divide your income into each section so that you can pay these bills as needed across the month. Bigger bills can be split across multiple weeks if you may struggle to pay them all in one go.

Once you have listed the categories, list the amount of money you need to pay for each item in the Monthly Allocations column. Then you need to list the amount and source(s) of income being used to cover each payment. For example, “Husband’s pay” will be marked as H, and “Wife’s pay” will be marked as W. When you log a payment in one of the weeks, you need to mark it with the correct initial and the amount being paid each week. Mark all payments with the amount that you need to pay from each income source used. Repeat this for each week in the month and then mark anything left over in the “Extra Income” area at the bottom of the sheet.

Monthly Expense Category Sheets

The next step is to save/print a Monthly Expense Category page for each category in your budget. This will give you one page for every single expense you have during the month. When you get paid, you will mark the deposit amount from the income source in your Basic Monthly Budget sheet. Then when any bills are paid, you will mark the withdrawal. In the Balance column, you will know how much money you have left in this account. The Monthly Expense Category pages are very important for you, because they will let you know exactly how much money you have for every category of spending each month.

Deposit/Expense History Sheets

The final sheets you will use are the Deposit/Expense History sheets which act as a bank statement for your budget. Each time you receive any income, you will mark it as deposited; each time you pay a bill, you will mark the withdrawal. This is all completed in line with the balances from your Basic Monthly Budget Sheet. This allows you to see at a glance the overview of where your money has been paid from and exactly where it is going.

Preloading Your Accounts

It is important to remember to preload your accounts in anticipation of a bill’s due date. This is because you want to have the money ready to pay any expenses before the bills are due. Always be prepared. This stops you from being in the stressful position of waiting for income to pay an already due bill.

When you receive any payments, you will preload your account with the necessary balance in preparation for the bill. For example, if your rent is due on week two of the month but you get paid on week one, then you will preload the rent into the rent account so that you are ready for the payment before the bill arrives.

This is an especially useful tactic to use when you are paying bills which are due once a year. In this situation, you can preload a small amount each month in preparation for your bill at the end of the year. This ensures that you are prepared for the payment rather than finding that you are struggling to pay an extra expense once it is due. If you start this budget part-way through the year, then ensure that you account for lost time by adjusting your preload deposits according to the number of weeks left until the bill needs to be paid.

Prepare For Surprises

Make sure that you include a category in your budget for surprises. Of course, you can never anticipate what surprises you will have, but you can start to plan for them now by allocating a portion of your income toward an emergency fund that will cover issues such as damage to your home or needing to take unpaid days off work. These unexpected expenses can cause harm to the most meticulously planned budget, so preparing for them can really pay off. If you ever need to dip into these emergency funds, then make sure you replenish the account so that you are prepared for the next time life surprises you.

What If You Can’t Cover Your Budget!

You may find when you first start your budget that there isn’t enough money to cover everything in your budget. This can especially be the case if you have yearly expenses that you have not been saving for. In these situations, you can get yourself started by selling something of value to get yourself a temporary boost until you start to get ahead of the game.

You may also wish to cut back on luxuries or nights out to help get your finances in order in the beginning. You can then start to make up for these missed luxuries when you have your free weeks. If this is the case, then you can cut back your entertainment or miscellaneous budget and just enjoy these luxuries when you have your free weeks. Once your finances are back on track, you can revisit these areas of the budget and allocate more income to them.

You can also choose to start your budget for a month which has a “free week” and preload using the free week itself. This will give you the next four weeks to get your budget in order, catch up with your payments, and then get ahead. You may find that some of your accounts are in a negative state, but this is OK at first as long as the negative accounts are the less vital areas of your budget. For example, your entertainment or clothing budgets are OK to be in the negative, but your rent cannot be negative. That payment must be made. In this situation, you would simply skip spending on the less vital entertainment and clothing budgets for a few weeks so that you can make your necessary rent payment.

Make sure to be very strict with your spending and only spend the amount you have loaded to your Monthly Expense Category on each area. If you see $100 in your bank account and want some new clothes but only have $20 designated for clothing, then you can only spend $20 on clothing. While this may be difficult at first, you will thank yourself later when you are free from your financial stresses! If – for any reason – you do need to spend one category’s budget in a different area, then you must show the transfer on your Monthly Expense Category sheets.

If your financial problems cannot be solved by strict budgeting alone, then you must look at areas of your life where you can make savings or earn extra money. Taking extra hours at work, looking for a second job, or taking in a lodger are all ways of bringing in extra money. You can also look to save money by cutting luxuries like cable TV or dining at restaurants. Moving to a neighborhood with cheaper rent or temporarily moving into a shared house could also be a way to help you save and bring your finances in order.