Build-A-Budget: Beginner’s Guide
I’m a firm believer in organization. An organized life makes for an easier life.
So, today I wanted to talk about the importance of organizing your finances – something I had to learn on my own (the hard way) at 18 when I first moved out. Except I’m going to teach you in just 5 steps…
If you haven’t already, you should invest in a good planner or calendar. Something about visualizing your plan makes it that much easier to follow through with. (I got mine at Target and I love it! They have such a variety.)
1: Determine your Monthly Income
How much do you make every week? This is as simple as averaging out your weekly paychecks and multiplying by 4 (2 if you get paid biweekly). If your income is frequently changing, I recommend using your lowest pay stub and multiplying it by 4. This will give you a little wiggle room in case you’re ever facing a rough financial situation.
TIP: WHEN CALCULATING INCOME, ALWAYS UNDERESTIMATE, ROUNDING DOWN. WHEN CALCULATING BILLS, ALWAYS OVERESTIMATE, ROUNDING UP.
2: Determine your Monthly Expenses
Like anything else, when it comes to bills you have priorities. Start there; make a list of all your most important bills in order of the day they’re due and including the monthly bill amount. This is the point where I will write each bill & amount on a calendar to help me visualize my goals. I like to begin with the bills that are absolutely necessary to “live” everyday: Rent, heat & electric, car payments, gas, phone bills, etc. Categorizing your bills this way will help you get more organized and more importantly, realize where your priorities lie.
TIP: DON’T FORGET TO ADD IN ALL OF THE OTHER SMALL, RECURRING BILLS LIKE NETFLIX & HULU, SPOTIFY, MONTHLY SUBSCRIPTIONS, GYM MEMBERSHIPS ETC.
3: Eliminate and SAVE
Saving is hard. Giving things up is even harder. Weed through your budget and see where you’re able to save. Corey and I don’t have cable, so spending just $16 a month on Netflix & Hulu subscriptions is so worth it for us. However, I opted to give up my $22/month gym membership because I don’t go that often – plus Corey’s includes a free guest pass that I can use as often as I want! Figure out what you really can do without and do away with it. This was when coupons became my best friend!
TIP: DON’T GIVE UP EVERYTHING. GIVING UP ALL SPENDING CAUSES YOU TO TAKE MONEY FROM YOUR SAVINGS. ALLOW YOURSELF SPENDING MONEY EVERY MONTH FOR THE THINGS THAT ARE IMPORTANT TO YOU. BALANCE IS KEY.
4: Monthly Income – Monthly expenses = Money left
Yeah… it’s that simple. Just take the number you got in my second step and subtract if from the number you got in the first step. This money is your leftovers! This is what you have “leftover” at the end of every month after paying bills. Tip: your “leftover” money should be at least 40% of your total income. What do you do with it? My recommendation: Save 25-40% and use 15-30% as spending money.
TIP: HAVE MORE LEFT AFTER SAVINGS AND SPENDING? STICK A FEW BUCKS INTO A HOLIDAY ACCOUNT. PLAN A DATE. SAVE FOR THAT TATTOO YOU KEEP LOOKING AT. FIX THAT SOUND YOUR CAR IS MAKING. KEEP UP WITH YOUR PRIORITIES AND YOU WILL ONLY BE ABLE TO REWARD YOURSELF.
5: FOLLOW THROUGH!
This has got to be the most important part of it all. Just DO IT! I promise you, if anything, you will gain a better understanding of where you are financially. And the best part of knowing where you are – you can figure out how to get where you want to go next.
Do you guys plan your budgets? What’s the toughest part?! Let me know down below in the comments!
“A budget is telling your money where to go, rather than wondering where it went. – Dave Ramsey”