Budgeting Tips for Beginners
Most of us want to budget but budgeting seems complicated and time consuming. I even found myself looking for apps to make it simple but could never find the perfect app. With most apps you have to link your bank account and put a lot of energy into categorizing purchases to find out how much you spend where to adjust your life in a particular area. That seemed to be more time consuming than just figuring it out on my own.
I took some time out and said to myself how can i make this easy enough for me to actually want to do it but accurate. First thing I decided to do was to break my income into three accounts; bills, saving, and spending. Then I had to figure out how much I needed to put into each account. So boom, I needed to know how much I was spending in bills but I wanted to break my bills out by bills I had to have (rent, electricity, car note, etc) and flexible bills, meaning the bills I can remove if I needed to save more money (netflix, amazon, spotify, etc). After I figured that out I made a list of income and I broke out all of my income by source (job, uber, roommate). From here I had all of my answers.
See the image below to understand how I broke out my budget.
As you can see I have a column for my bills, other bills and income. I break each item I’m paying out by name, list the amount and total the column at the bottom.
Let’s say you make $3,000 a month
Rent/Mortgage – $500
Electricity – $100
Car Note – $300
Internet/Cable – $100
Total – $1,000
Spotify – $25
Amazon – $25 Netflix – $25
Squarespace – $25
Festival Payment – $100
Total – $200
I add the bills total to the other bills total which becomes the bills total then subtract that from my income total to have my total non bill money.
$1,000 + $200 = $1,200, $3,000 – $1,200 = $1,800
I divide my totals by the amount of times I am paid monthly. If I am paid twice a month, I will divide by two and if I am paid once a week I will divide by 4. Easy enough? So, if you are paid $3,000 a month but you are paid twice a month you will have $1,500 each paycheck. Our bills total is $1200 so we need at least $600 in our bills account
From there I can calculate how much needs to go into what account.
Bills Account – Total Bills amount/2 + cushion ($50)
$600 + $50 = $650
Saving Account – I save something every check even if its $5 but try to get up to $100
Spending Account – Remainder
$1,500 – 650 – 50 = $800
To make sure I am constantly adding more to my savings account, I roll over any left over money from my spending account. So, anything that is not a bill I use my spending account (groceries, gas, going out, shopping, etc). At the end of the pay period I roll any remaining money in my spending account into my savings account and start over. I try to live off of my check for that pay period. If I wanted to use the money in the savings, I do!
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