I Know I Need a Budget, but How?

Congratulations! You just received your first big time, real world job. All of the sudden you are taking on life with full responsibility of your bills without the aid of your parents. You are making a considerable salary that is considerably depositing some of the largest pay checks you have ever seen before in your life (wowza $$$$!). But wait a second…some of us may have experienced the “I just got paid last Friday, how do I only have $25 left in my account?” Or, “Oh my goodness! Rent is due in a couple weeks – where did all of my money go?!” The exhilarating shock of receiving large lump sums of money turns into a terrible shock when you have no clue as to where all your money is disappearing to. No need to panic! I am going to cover 4 ways that you can create a budget to get your financial game plan back on track. You can either stick to these methods strictly, or follow them loosely. Either way, I want you to feel absolutely confident that you can pay your bills responsibly & timely, save for the future or a rainy day, and treat yourself even! It just takes that first step to realize that budgeting does not have to be difficult.

There are a multitude of ways to take on the task of creating a budget, but I am going to cover just a few. Before getting started, the first thing that I believe is most important is to determine what your monthly take home pay is (if you do not have fixed income, make your best estimate for a month). This will be your starting figure for each of these budgeting methods. Second of all, whichever method you choose – always try to create a buffer dollar amount in your account (a bonus if you have a separate emergency fund set aside!). You do not want to get in the dangerous spending zone where you leave yourself with $0 leftover per month….or even worse, overspend what you actually make per month. You can get to the point of saving and rolling money over from month to month, you’ve got it in you! Here are the following 4 budget methods I am going to cover:

1. Kick it Old School by using Excel

Excel spreadsheets are absolutely amazing & have capabilities that are beyond measure. Utilize an Excel spreadsheet to type out your monthly bill amounts & payments. This way, you have tangible numbers all in one place of what you owe from month to month. You can keep track of whether a bill has been paid or not to monitor your progress. Want to get fancy? Incorporate calculations that can subtract these payments once completed to see what money you have leftover for the month. You can keep it more simple by just including your fixed expenses (i.e.: rent, cell phone payment, car payment, school loan payment, etc.), or go more in depth by adding your variable expenses as well (i.e.: clothes shopping, gas, gym membership, charity donations, etc.). Keep in mind that your fixed expenses are those items that you absolutely have to pay for in order to carry on your daily life. Variable expenses are those that are more so optional and may fluctuate from month to month depending on what occurs.

2. Embrace the Advancement of Technology

There are a serious number of smartphone apps and websites that allow you to feasibly create budgets in minutes! Try out these few: Mint (mint.com), LearnVest (learnvest.com), and LevelMoney (levelmoney.com). Each allow you to connect your accounts in order for you to monitor and track your spending. Each are backed with intense security and encryption, so your information is safe. As millennials, we know the drill for technology – we have an advantage when it comes to utilizing these technological tools that are available to us. Budgeting through the following tools allows you to create spending goals, set up notifications when you have either over-spent on a spending category, or physically see how much money you saved from one month to the next. Mint also calculates your net worth, which I think is pretty dang cool.

3. Utilize the 50-30-20 Breakdown

The 50-30-20 breakdown is a common way that people create their budget. The breakdown is as follows: 50% of your monthly take home income should be spent on fixed expenses, 30% of your monthly take home income should be spent on variable expenses, 20% of your monthly take home income should be put towards savings. Say hypothetically your monthly take home income were $3,000 – your breakdown would be as follows: $1,500 to be spent on fixed, $900 to be spent on variable, and $600 to be put towards savings. According to your preferences, the breakdown could be changed to suit your current lifestyle – for example, you would much rather have a 40-20-40 breakdown. The choice is yours!

4. Write it Out & Shape it Up

Don’t really feel like utilizing any technology for your budgeting? No problem! Bust out that blank journal or several pieces of paper. Each month, every time you make a purchase or pay a bill, write it out! By the end of the month, go through an overview all of your payments (cross-reference with your bank statements if you need be to ensure you did not miss anything). Highlight reoccurring expenses that you think you may be spending too much money on. Write/designate next to payments as “wants” versus “needs.” Are there several “wants” written down that you can focus on not spending as much money on in the next month? On the contrary, a spending category you do particularly well not spending in? Shape up your finances the way you would like them to be. The glorious thing about viewing where your spending/saving is going is that you can further learn how to readjust certain spending categories. Did you accidentally spend just a little too much in one category? That’s A-Okay! Try to spend less in another category to keep it in balance.

Alright, so I hope that wasn’t too much of a snooze fest. Personal finance and budgeting can actually be incredibly fun…okay, maybe not to everyone. But it is so totally worth it. Think of how empowered you can feel to know that you can feasibly pay for your bills, allocate to your future retirement nest egg, and splurge on that fancy dinner with friends every now and again! The first step is the recognition, the second is creating a budget that is tailored to your needs, lifestyle and income. One method may work best for you, while another method can work absolutely better for your friend. Now go out there and treat yourself because all your bills are paid on time & you know just how much money you truly have!

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