When I was in college, I had a very loose budget. I would try to keep track of my spending and flip-flop on having any sort of a plan. I was young, didn’t really have an income and usually ended up saving any money I got anyways. Once I graduated though, this changed. I now had an actual income, bills to pay and huge saving goals in mind. I’ve had to spend my time since graduating learning how to budget my money and I must say, I think I’m finally getting the hang of it.
Make a Plan
Start by making a list of all of the things you need and want. Think about things as big as rent/mortgage payments or as small as a $5.00/month subscription. Include things you need as well as things you want (clothes, makeup, etc.). Include savings, investments, everything. This will be the starting point for your budget. From there, write down all of the sources of income you have. Below that, write all of the taxes you have taken out. I prefer to track my total income and my taxes (that way I know how much is being put away each week), but if you prefer to feel free to just write the post-taxes amount. The most important thing is you know how much money you have to spend and allocate. After all of this has been done and you have your shell, it’s time to make your actual budget.
Be Realistic About How Much You Make
If your salary fluctuates like mine does, it’s important you be realistic about how much money you make. Don’t look at what you make when you work during your ideal week. Look at what you make during those weeks when your hours are less than you wanted. That way, you’ll end up having more money rather than less. I find it’s always a nice surprise when I end up making more than I expected in a month. When I make less than I want to in a month though, I am still prepared for it because I budgeted for situations just like that one.
Start with What’s Important
Once you’ve figured out how much you expect to make each month, start plugging in all of the numbers that won’t change from month to month. These would be things like insurance, car payments, all those things you have to pay for. For me, this was the most painful part of making a budget because it felt like all of my hard earned money was going away. Once it’s over though, there’s a huge feeling of relief knowing there is money left and it can be spent however you want. Don’t forget to include things such as groceries in this as well. I think of it as (more or less) all of the things I can’t live without
Decide What To Do With Extra
Once all of the necessities have been accounted for, you can decide how you want to allocate the rest of your money. Each month I include things such as toiletries, makeup, clothes, eating out and my Disney pass to name a few things. After writing down all of the extras I decided how I wanted to allocate my money. For me, this is just as important but is also the part that matters least. I try to pick a specific amount to spend, but as long as I don’t go over the overall budget I am usually okay with my spending in this area. For example, I have a small amount allocated to both toiletries and clothes each month. Some months though I don’t need toiletries but will go over on my clothes. To me, this is making the decision to have less of one thing and more of another. The more I can save at the end of the month the better, but as long as I am cognizant of these changes to my budget I will let them slide in moderation.
Be Realistic About Costs
As you’re making these decisions, be realistic about how much everything costs. As with your income, it is better to allocate less and have leftovers than to allocate too much. The first couple of months will probably be a huge learning curve. I basically ended up readjusting my spending for the first three months or so until everything evened out and I figured out what worked for me. Looking at the overall spending as well as the individual spending works best I find. I have soft goals as to what I want to spend on an individual type of item and hard goals when it comes to spending in a category. For example, say I budgeted $100 for groceries and $50 for eating out (I sure wish this could be accurate and I could actually survive on this). If I end up spending $75 on groceries and $75 on eating out, as long as my category total comes out to $150, that’s what matters to me the most. This gives a little more freedom as to how you spend your money and allows for the fudge factor when trying to determine realistic costs.
Know What You’re Saving For
Knowing what you’re saving for can help so much! To me, the whole point of a budget is having money to save. That way, when I want to make a big purchase I will be able to do it without a second thought. It’s so much easier for me to restrict my spending and save when I know what I’m saving for though. Right now I have a couple of pretty big savings goals in mind. When I think about spending money I ask myself if I would rather spend the money on whatever is on my mind or if I would like to put it towards my big savings goals. Usually, it’s the latter.
Don’t Let Budgeting Get in the Way of Life
To me, this is the number one most important thing. I work hard and I save almost all of my money. Never do I want to be in a position where I have to say no to something fun because my budget doesn’t allow it (assuming I know I have the money) and I never want to let my budget get in the way of sharing with others. I work hard to live within my means and as long as I am doing just that I strongly believe there is no reason I should sit at home instead of going out and enjoying life.
And just like that, you have a budget! Spend the next couple of months perfecting it to meet your needs.