Wednesday, August 10, 2016

Budgeting 101 : 6 steps to get you started

For some people budget is a big scary word that means you can't spend money on the things you enjoy. It's not true though! If you budget right, a budget is a big fancy word that means I have money to spend on things that are important to me. See the difference? Maybe not yet. But lemme break it down. You don't have to restrict yourself (unless you're spending more $ than you make) but rather determine what's important to you and send your dollars there.



In college I never had a budget, I wasn't spending tons of money, and I didn't think I needed one. Flash forward to my first job out of college, I was raking in seriously big bucks, driving a company car and didn't have a single worry about money. Until I quit. I couldn't take it. The job, the company, the people, were sucking my soul and it wasn't worth the money.

I was living on my own, in an apartment by myself, 5 hours away from my family. 100% unemployed, and with no next job lined up - but plenty of student loans to pay. So, I sat down, looked at my accounts, and made a budget. 

This was back in 2013, and I've been budgeting ever since. So much so, that I've got it down to science now. I usually know by rough guesstimates in my head if I'm over or under, and I don't track quite so religiously now.

I'll be back to share my budget, and some real numbers for spending in a future post. In the meantime, here are the 6 steps that got me started with a budget.

1. Decide how to track expenses

There are fancy apps, there are plain old spreadsheets, there are printables to use with plain old pen & paper. But decide on how you will track your expenses. Do what works for you. They all yield the same result.

2. Track your expenses

For a whole month - save every receipt, make note of everything you buy with cash. No purchase is too small to count. Add it all up, using your app, spreadsheet or pen & paper. Write it all down.

3. Determine your income

Figure out how much money you make each month. Since I work that corporate cube farm life, I know I get paid every other Friday, the same amount, give or take a few bucks, since dental comes out only once a month, not twice. For me, I add up those two numbers, and poof, that's how much money I make each month. I don't have a side hustle. I don't occasionally make some extra cash, that's it.

Your formula may be a bit more complicated depending on your situation, but sit down, take a few minutes, and figure out, worst case scenario what you'll bring home next month.

4. Figure out the necessities

In my opinion, the easiest way to do this is to take a look back at everything you spent the month prior & determine what you could live without. Not would want to live without. But, if you lost your job right now, what would you need to survive. Start there, with the basics.
Rent - necessary
New shoes - probably not necessary
Groceries - necessary
Starbucks - not necessary

5. Figure out the wants

This is where Starbucks & Target runs come in. Now that you know your income & your needs, you know if you've got some $$$ leftover to spend on the fun stuff. You probably will, but you may not. That's okay, there are ways to make it work. The important part is not spending more money than you make each month.

6. Adjust spending as needed

Now comes the hard part. You want to save up for an epic vacation, but you're having trouble finding room in the budget. Well, would you rather have your Starbucks or an extra $20 a week towards vacation? For some people, the answer might be Starbucks, for some people it might be vacation...for some people, they're saying I don't buy Starbucks, so I can't quit it & have an extra $20 (I actually fall into this category myself). The point is there IS something you can do without, if you want to, but you've got to find what that something is.

Do you budget?
Where do you prioritize your spending? 
Shoes? Starbucks? Vacation? 
Did your parents make learning about money a priority growing up?

Linking up with Amanda to share + LovePastaToolBeltA Little R&R 

20 comments:

  1. budgeting is such a valuable lesson that i teach my 8yr old and have been teaching her (or trying to -- kids just don't get it!) since she was 6. when i was 15, i took over "the books" from my parents; my dad said that it's important to learn about the value of money/how to balance the books so he handed that to me and had me do it. one of the very many amazing skills he taught me and to this day, saving is my #1 priority.

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    1. That's so wonderful that you're teaching your kiddos & that your parents taught you. It's one of those things that is so important, but school never covers. Or at least mine didn't.

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  2. i never used to have a budget until the last year or so, and it has really helped. i love tracking or expenses, knowing how much i 'have' to spend on bills and such and then saving the rest. normally i shop or spend it on travel, we are trying to be really good about saving right now because of the unplanned expenses that popped up over the summer. boo.

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    1. Even if I spend my money, I like knowing that it's mine to spend. And that my bills are covered no problem.

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  3. I am horrible at doing budgets. Though I am good at tracking my spending. Its the number nerd in me. & plus, it lets me see where all my money is going.

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    1. Definitely. Honestly, if you're tracking your spending you're probably more aware of your habits than you realize. Some people have no clue!

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  4. This is a great post! I agree, I like to think of budgeting as a way to save for things that are important to us. We like to travel and keeping to a budget the rest of the time helps us have the money to go on vacations :)

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    1. Yes, same here! That's pretty much where all my extra money goes. That and early retirement so I can travel more!

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  5. Loved this. Thanks for sharing. I officially started budgeting a couple of years ago (with really tracking spending and all), but I have always been a budgeter subconsciously, because I never spend more than I had and was always aware of my priorities. My parents didn't really "teach" me how to budget, but they taught me the value of money (which I think is an important piece of the puzzle).

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    1. Definitely an important piece of the puzzle. Mine taught me to never spend more than I earn, which I always thought was DUH, but apparently not, but I had to figure out budgets all by myself!

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  6. I'm the kind of weirdo who lovesss budgeting and does so naturally, however, Jesse is the total opposite. If he had his choice, he'd spend money as he received it because it seriously burns a hole through his pocket.

    I think one thing people don't realise about budgeting or saving money is that you don't have to stop spending money - you just have to spend smarter.

    Another thing I've found is that sometimes business owners or freelancers budget on how much they WANT to make a month rather than how much they actually make and that's a huge problem. You're so right in saying that you need to base it on the worse case scenario.

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    1. Ooh, I can't even imagine how difficult budgeting for irregular income would be. But yes, worst case scenario, or maybe even budgeting on a one month lag, so your August budget is based off July income and Sept budget off August income.

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  7. I don't actively budget because my banks mobile app tracks everything for me... BUT I NEED TO. Because I rarely check my app because I'm consistently ashamed of all the dumb shit that I'm spending money on. I'd love to see some real life examples and real numbers from someone who sounds as responsible as yourself!

    Danielle @ afloat on a full sea

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    1. Well girl, check your ass on back in here on Wednesday, 'cause I'm sharing. And then I'll get down to the nitty gritty again the week after. :)

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  8. I have a spreadsheet on Google Sheets for our house - it really helps me see where I'm going overboard and it helps me see why/trends in my spending. I love how simply you laid this out - budgeting doesn't have to be this huge to-do!

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    1. It's one of those words that seems to induce panic. Like people think they'll be cut off from buying things ever again. Nope. Just know what you're buying & make sure it's worth it!

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  9. Yes I do budget! Simply tracking my expenses has really opened my eyes. $20 here and there doesn't seem like a lot at all but then visually seeing how many times I spend money over the month really was an eye opener. I'm so old fashioned and use a spreadsheet haha.

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    1. YES. The BF & I each use spreadsheets too, so no shame in that game. I tried Mint, and still have an account, but it errors out sometimes which I find annoying.

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  10. Ahh I find budgeting so difficult. Naturally, I'm pretty good with money. I'm lucky I inherited that from my mom! I don't spend recklessly, but I struggle to keep my receipts or use an app or spreadsheet to track. I agree that it's smart to do so though!

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    1. I struggle with keeping receipts too (except grocery receipts, IDK why but I always save them) - but luckily I can usually remember what I was doing when I take a peep at my credit card transactions.

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