It’s time to get real about your budget. You see all the apps, your bank has its own “Money Management” page, hell, even my insurance has a budgeting tool. It’s no secret that if you don’t manage your money upfront, you’ll end up low on funds at one point or another. I have been obsessed with budgeting lately and I have learned so much. (All due to my fear of debt btw.) That being said, here are 7 ways you can start a budget today that actually works.
First Thing’s First, Why Should You Have A Budget?
- It helps to reduce unnecessary spending.
- Instead of “feeling” like you’re good or bad with your money, it will make it clear where you stand financially.
- You gain financial discipline (a very helpful skill for adulthood, lol)
- You can create a better savings plan.
- You’ll begin to find money in places you didn’t expect.
- You’ll gain more financial freedom and have better control over your own life.
Did you read any of those and think, “Wouldn’t that be nice?” It’s possible, just follow the steps below and learn how to make your very own budget.
Step One: Income
How much money do you make in a month? Calculate that total first and if you get any side income (like tips) just provide an average number on what you’ll receive. These numbers do not have to be exact but if you’re unsure, round down to the nearest amount. Save that number to the side, it’ll be important later. Duh.
Step Two: Have To Pay’s
As an adult, we normally have reoccurring expenses that we see as “have to pay” things. You’ll recognize these as your bills. Calculate as a monthly basis. Here are some categories to include.
- Groceries (average amount spent)
- Car Note/Bus Passes
- Car Insurance
If you have any other items that are similar to these ones, feel free to include them. Once that’s done, calculate the total and move onto step two.
Step Three: Subscriptions
Yes, subscriptions. There are a lot of things today that require you to pay a small fee every month to use a particular platform. I’m sure you might recognize the name Netflix? That’s what I thought. Even if the fees seem small by themselves, they can stack up.
- Movie/TV Streaming (Netflix/Hulu/HBO/etc)
- Music (Apple Music,/Spotify/etc)
- Clothing Subscriptions
Step Four: Little Luxuries
I’m just trying to be corny at this point, haha. No but really, these “little luxuries” are the things you spend on because you want to…not always because you need to. Take a look at your last two paychecks (if you’re paid bi weekly) and start figuring out where your money really went to.
- Entertainment (Bars/Movies/etc)
- Personal Care/Grooming
- Eating Out
- Miscellaneous (ATM Withdrawls/lending money/random spending)
*If you have a credit card that you use for any of the expenses I have listed, you will need to calculate those costs too.
Step Five: Savings
If you are actively saving, give an estimate as to how much you generally save every month. If you are not saving, come up with a number that is doable for you at the moment.
Step Six: End Up With $0
Woah woah woah. I’m sure you read that thinking, wait but isn’t budgeting supposed to help me have more money? The answer to that is….yes. However there is this concept called Zero Based Budgeting. The formula is simple:
Income – Expenses – Savings = ZERO
The goal is essentially to end up with $0. That can seem pretty scary at first, I’ll admit. But it has done so much for me and I know it will do well for you also.
Step Seven: What’s Left Over?
After you’ve done the above steps and calculated your spending according to the formula…what’s left? If you ended up with $0, great job! You’re already on track and probably already follow a budget pretty tightly. If you ended up with a positive number then you can either save more or spend more. If you ended up with a negative number that means you have been and will most likely continue to overspend if you don’t adjust your newly made budget.