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Budgeting 101: How to Get Started

If you are like the rest of us then you will know trying to track all your money is not easy especially when it seems like it’s going into a black hole. For this reason alone you need to make a budget.

Right, I said the B’ Word.

If the word “budget” makes you cringe, maybe it’s time to change your mind. I promise it is not all about penny-pitching and sacrificing the good stuff. When it comes to budgeting all we are trying to do is make a plan for your money so it can be spent wisely. You will be surprised at how much you spend on small things like candy bars or gas station snacks.

It doesn’t seem too bad, does it?

First, we will get started by writing down some important facts…

  • First, we need to know your income. This includes regular wages, side hustles, and anything that makes you money.
  • Now let’s add all the must-have items. This includes things like utilities, groceries, phone bills, internet, transportation, and rent. 
  • Consider all the things you enjoy, but are not a must. The good stuff like the gym, takeout, book subscription, shoe addiction, etc.
  • What about those annual expenses? Things like car insurance, home insurance, annual memberships, annual credit card fees, birthday gifts for friends and family.
  • Finally don’t forget to add the things you are working towards. This will include investing for retirement, paying off debt, saving for a home, car, wedding, or baby. This also includes smaller amounts like an emergency fund or trips.

Now you will want to add the amounts next to each item. Some things might change month-to-month, but you can average those items. Other items like phone bills and rent will probably stay the same each month. On the ones that change you can always check your bank statements or credit card statement to see what the highest amount was and go with that. This will allow you some wiggle room.

Related: 11 Journals to Help You Budget, Track, and Plan for 2022

What’s next?

Now that your income is at the top of the list you will want to subtract each of the items on your budget list. Do not add more items to the budget if you are in the positive. It is better to put any extra money into savings for backup funds or pay off debt. 

If you have ended up in the red you might need to go over the budget and see what can be cut. Maybe it is something you can negotiate for a lower price. But either way, start with the items you enjoy but are not a must-have. This could mean one less trip to Starbucks, making lunch at home, getting a roommate, or cutting back on all the subscriptions. 

Now that the difficult stuff is done. Here is how to stay on track…

  • All-cash diet. It occurs when you withdraw cash to pay for items such as clothing, food, gas, etc. Stop spending when you are out of cash.
  • 50/20/30 rule. You spend 50% of your income on needs, 20% on goals, and 30% on wants.
  • The anti-budget budget. Aka the “pay yourself first” budget. By setting up automatic bill payments and investments, you can funnel money directly from your paycheck or checking account to your needs and goals. The remaining funds can be used however you like. Rules haters and all-stars generally in stable financial standing usually do well with this.

What if I make the wrong choice?

If you are struggling to stay on course with your budget then make adjustments. Just because you started with a certain budgeting style does not mean you have to stick to that one. Try out another and see if it is less stressful and easy to maintain. 

Just because you have a budget does not mean you have to say no to everything. The purpose of a budget is to get you in a habit of spending wisely, reach your goals, and live the best life your money can afford.

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