I know, I know…budgeting sounds like a boring topic. And it can be. But there is nothing more “grown-up” than budgeting and paying your bills. One of the most important things you can learn in order to make ends meet and find success in the future is creating and following a budget. From budgeting the birthday money you get every year if that is your only source of income, to owning a large corporation, budgets are the backbone of making sure you are handling your money well. You work hard for your money, shouldn’t you work harder to make your money last?
Budgeting does take some time and it is best if you make sure to create time each month to work on it. Add it to your schedule of things to do at the end of the month, so that the following month is ready to go and you know exactly where to spend your cash.
Even though the amounts may differ and the expenses you have may vary, all budgets are very simply figuring out how much money is coming in and how much is going out. That’s it. It doesn’t have to be complicated. If you are starting a budgeting plan after already being in debt and spending several years without one, living paycheck to paycheck, and never having fun, you may have to look a little deeper into your spending habits so that you can be honest with what expenses you have. But that shouldn’t stop you from creating a plan and sticking with it. There are plenty of free printable budgeting sheets, budgeting planners you can buy, and budgeting software. My favorite ways of budgeting are with pen and paper or with an Excel spreadsheet. It doesn’t matter what format you use, as long as it is something you are comfortable with using.
My following example of a budget is one that I have helped my 23 year old daughter create. She is a college student who lives at home with me and her 2 year old daughter. She has extra expenses, such as daycare and diapers, but she also receives child support which she includes in her income. She isn’t currently working, but instead gets a student loan refund which she needs to budget to last her until her next refund or until she gets a job during break. As you can see, she has income and expenses, just like anyone else. You may have a regular paying job, a side hustle, or some other form of income that you should include in your budget. Let’s get started.
Step 1: Income: At the top of your page, you should list your income for the month. You can estimate if you aren’t sure the exact amount, but I would try to estimate lower than what you expect so that you have a little wiggle room if you end up making more. In my daughter’s case, I had her divide her student loan refund by the number of months she needed to make it last. Then we added the monthly child support:
Step 2: Large expenses: We are going to start a list next of expenses and I like to start with the ones that are absolutely necessary: house payment, rent, car payment, car insurance. These are the basic things that one must have and cannot NOT pay. They are the highest priority and they usually are the same amount every month. List the categories that pertain to you and write the amount of the payment due next to it. I like to line everything up in a column so it is easier to add later on. Here are my daughters large expenses:
Step 3: Utilities and fluctuating necessities: If you are living in your own place, chances are you have utilities, such as electricity, water, cable, etc. You probably also have a cell phone, this would be listed here. These are all the things we need to pay for but that might change from month to month. Usually we can estimate the amount based on what our previous bills have shown. My daughter lives with me, so she does not have any of these kinds of bills to put on her budget.
Step 4: Revolving payments: These are credit cards, loan payments…anything that you could pay off eventually. Some people suggest you list these in order of highest interest rate to lowest interest rate, or from highest monthly payment to lowest. If this is your first budget, I wouldn’t worry about that at this point because you are probably not in the position to pay it all off anyway. But if you are, then you can choose which method you prefer. Make sure you list the amount you plan on paying, since you can always choose to pay more if you are able. (The best part of budgeting is seeing if you are able to pay more than the minimum payment if you are able beforehand.)
Step 5: The fun stuff: Yes, you have to budget the fun stuff! That is how you are going to be able to have fun AND pay your bills. Here are some categories to think about: meals at home, meals at restaurants, going to the movies, going to the salon, buying makeup, birthday presents, Christmas presents. You know what you like to do. Budget for it. Even if you aren’t sure that you are going to be going out to dinner with friends, you can still budget for it so that if the opportunity arises, you won’t feel left out. Being a grown-up is all about finding the balance between responsibility and fun! You can see all the categories my daughter is planning for this month. Imagine knowing ahead of time that you can pay all your bills and still buy the fancy shampoo you love so much!
Okay, so now you have all your categories filled in. I like to go through each bill and also write beside what day of the month it is due. This helps me decide which payday I will be paying which bill. On a calendar, I can then write when I will be paying what and see exactly how much money will be available each week. One thing I haven’t included, but you definitely should, is savings. Some people believe you should save a percentage of your income or a specific amount immediately when you get paid. If this is you, add a savings column to your large expenses. If you are the type who is planning on saving anything that you have left over at the end of the month, add savings to the fun section. You should be able to subtract your expenses from your income and either be at 0 or a positive number. If you are below that, then you have to reassess your fun budget first. It might not be “fun” to see that maybe you have very little fun budget sometimes, but at least you will know that before the month even begins. That gives you the opportunity to either cancel plans, re-evaluate your priorities, or try to make some extra money. If you had no fun budget and are still negative, then you definitely need to find a way to make more money or lower major expenses, which can be difficult. What if you have a clothing budget of $50 each month, but decide you don’t need clothes this month? You have the option of moving that $50 to another category, saving the $50, or carrying it over to the next months clothing budget, so you will have $100 next month for clothing. Doing this can help you save enough for large ticket items in small increments every month.
See, wasn’t that fun? No? I hear ya! It isn’t always fun to be an adult. But there are things we must do on a regular basis. Budgeting should become as much of a habit as showering or changing your underwear (if those aren’t habits, we will discuss THAT in a later post). When you plan for the month ahead, it is usually a relief to see that you can afford to pay your bills and hopefully have fun. If you are having financial difficulty, budgets can help you see where you need to cut back or earn more. No matter what format you use, your budget is a guide for you to follow and having a plan always takes off some of the pressure of being adult.
If you have questions or comments, please feel free to leave it down below. Let me know if and how you budget. Follow, rate and subscribe to my blog for more information to help you navigate the grown-up world.