Whether you’re just starting out on your own or want to re-evaluate your spending habits, hopefully this list has something for you!
Determine How Much You Actually Make After Tax/Retirement
Check your pay stubs - most jobs allow you to do this online. Use the final take home pay as the basis for your budget.
This may change month to month so use a lower amount as your base for your budget
Figure Out How Much You’ve Spent The Past Few Months
From rent to entertainment, everything should be accounted for.
Make a list of everything you buy. You need to know what you’re spending to help guide your budget.
If you aren’t sure where your money is going, there are a few options. You can use an online service like Mint that tracks the categories of your purchases. You can also go through your card statements and see what you spent. If you use cash, try and log all purchases in a notebook or on your phone.
I can guarantee you are spending more than you think. I can guarantee it because my husband and I, and all the friends I’ve helped build budgets for have been shocked at what we spent before budgeting properly.
Break Down Every Expense - Everything. Leave No Dollar Unscathed
Your budget is built on how you decide to use each dollar you have. Now that you know what you’re spending your money on, you can decide whether or not that amount is reasonable for you.
You need a category for every dollar. My husband and I have almost 20. Mortgage, grocery store, eating out, entertainment, medicine, clothing, home goods, gas, car insurance, every other kind of insurance, etc.
Figure out your categories. No two people will have the same and you’ll find over time what works for you,
IMPORTANT: The categories you need to figure out first are the essentials like rent, food, insurance, loans, medication, energy, etc. Always work those out first because those are the ones you can’t mess around with.
From there you can break down the fun stuff, the want to do stuff, and the long-term goals/saving goals.
Excel Is All You Need
Once you’ve figured out where your money needs to go and how much goes in each category, you need to record it.
Set simple rules (you can google them) that allow you to add up how much you intend to spend in one column and how much you spent in another. Have one row per category and excel will do the math for you.
Keep a template of your budget and copy one for each month. Never write over a previous month’s final budget. Keep everything so you can track spending trends over time. This helps save money because you can cut costs in places you don’t spend as much as you anticipate and place that money somewhere more valuable.
Look at the budget at the end of every month and add up everything you spent for each category. Mark the final number red or green so you have an easy visual of your under/expected spending and over spending. This helps you adjust over time.
Build An Emergency Fund ASAP
Emergency funds are the backbone of financial stability. Whether it takes three years or three months to build your fund, do it as fast as possible. Even if this means cutting on things that are “extra” like a movie or video game. The peace of mind that comes from an emergency fund is worth a few extra dollars a month if you can swing it.
Ideally, an emergency fund should be three-six months of your income. But that’s the textbook definition. And this is NOT feasible for everyone and I’m not going to pretend that people can do this is all situations. Nor shame anyone who can’t because I want to encourage people to save as they can. Whatever money you can save is worth it.
Make your money work for you because it’s a utility, not a jail cell. It’s a tool and an emergency fund is another tool in your toolbox.
Reevaluate Your Budget and Goals Every Few Month
Situations change and so do goals and aspirations. Your budget should reflect your life as it is now while breaking down the process to lead you to your long-term goals.
If you’re saving for a car, include a section in your budget that you’ll drop $50 a month in your saving account and it will take you x months to get your car.
I also recommend a separate box in your excel sheet that lists your wants over time so you can evaluate and keep your goals top of mind when you look at your budget every month.
My Favorite Budgeting Resources
reddit.com/r/povertyfinance - I really like reading this subreddit because it is nonjudgmental, honest help for people with a tight budget. It includes everything from insurance to building an emergency fund. it’s an amazing place.
reddit.com/r/personalfinance - The OG PF subreddit. This subreddit is also a good place to look for ideas and inspiration on how to manage your money. The people on this subreddit are often a bit well off and can come across out-of-touch at times. But there is still a lot of good information about everything PF.
reddit.com/r/financialindependence (also known as the FIRE subreddit) - FIRE stands for Financial Independence, Retire Early. These are the people looking to invest, save, and craft their money to retire early. Honestly, this subreddit is fascinating, but if you aren’t looking for investment and high earner money management, this probably isn’t for you at the moment.
Mint: Budget Tracker and Planner - My husband and i used Mint when we first got out of school to help track where were were spending our money. We only used it for a few months but it made a huge difference.
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Note: I am not a fiduciary or certified financial advisor. My husband and I simply love budgeting and personal finance. I want to share our tactics for others to use and adapt as they see fit.
No two people’s budgets are the same and what works for us may not work for you. But I certainly hope something in this list helps you get a good start on your own budget. Because EVERYONE needs a budget.
