Budgeting 101

No matter your income level, a certain amount of budgeting has to occur to be even the slightest financially successful.

A quick search online will net you a slew of articles and blog posts to help you find a place for every last penny you earn. But in all reality, you don't need a financial article or a hired hand to help you set a budget. Sure it may seem daunting, but once you get down to the nuts and bolts of it, you'll wonder why you haven't done this a million times before!

All you really need is paper, pencil, a calculator, pay stubs for the month, a general idea of how much you pay in bills each month, and an even more general idea of math. Or, use Excel or Google docs to do the math for you.

(Note: I am by no means a professional, so take it how you will.)

1. The first thing I do is calculate monthly take-home pay. (Since I only get paid monthly, this really isn't too hard to figure out.) I like looking at monthly vs. weekly (or bi-weekly) pay because it gives a truer sense of how much money you have. That, and most expenses are billed monthly anyway.

2.  I then figure out the totals for the absolutely necessary bills (sorry, your morning latte isn't covered in this section). Think more like rent/utilities, cell phone, car payments/insurance...You get the idea.

3. After I total everything up, I subtract that from the monthly pay total. This number gives you a picture of what you have left to spend. Can also be sometimes scary, no?

4. From this figure, I then subtract totals for food and gas. This part of the budget can be a real gut-check. Gas may be a bit easier to keep track of, but believe me, food is where you will begin to see your money dwindle. And fast. Food totals should include groceries as well as eating out and any coffee/donut/candy/pop runs you make throughout the week. 

5. By  now we should have covered all the important expenses you may incur throughout the month. Do you have money left over? Hoooray! You can chose to put a portion into savings (smart idea), leave it for any surprise expenses throughout the month (also not a bad idea), or you may divide the remaining money further. For example, I really like the idea of a cash envelope: the money there is "whatever" money for the week--this is where you could include coffee et. al and curb those habits (might as well kill two birds with one stone). 

If you have made it this far, you now have a better idea of where all your money goes! But hold on....now you actually have to do some planning. As in figuring out what to pay and how you're going to pay it and when it is due...the fun begins!

6. I like to break down the major expenses-rent, utilities, cell phone, car payment, car insurance-in order to know how much money per check you should be saving. Get paid weekly? Divide by four. Bi-weekly? Divide by 2. (For example, if your rent is $600/month, you would need to save $150/weekly check or $300/bi-weekly check to insure you have enough money to pay at the end of the month.)

7. As with the steps above, once you have the majors covered, you now figure in other important expenses like food and transportation. For food expenses, you can take the total you spent and divide that or you can allocate a different, more specific amount. This is where the budgeting really kicks in; having food to eat is a lot different than having enough food to eat. This is a great place to cut your spending down greatly, so take some time to determine what is necessary vs. what is not. Unfortunately, those donuts may not be covered... 

8. Once you have everything mapped out, now is a good time to figure how much money you want to allocate for everything else not covered. I don't think you should have every penny spent; who knows what will happen. Maybe you'll get sick and need money for a doctor's visit or medication. Or perhaps your car will decide to be really awesome and you will need money for repairs. Life is funny like that sometimes. In any case, make sure you have something set aside for little surprises. This portion of the budget is also the most variable month to month because it is so dependent on everything else. Bills can be fairly constant but take home pay can fluctuate, especially if you don't have set hours. So, it is always a good idea to have some savings built up in addition to the monthly left-overs. 

As with anything, planning a budget is one thing, but sticking to a budget is something else entirely. It will take a few months to get used to a plan, but once you do, I promise you won't regret it. :)