I think I could talk about budgeting and money all day long. Sorry, fiancé. So here is the first in my series on finances: the basics of WHY you need to look at your budget and a simple way to set it up if you haven’t yet.
You know that feeling when you don’t have something and it is all you can think about? But once you have it, it’s not a big deal. That’s what your finances are doing to you when you ignore them. Not opening your bills does not somehow make them go away. Trust me, if it did, I would NEVER check my mail. Ignoring the slightly growing number on your credit card seems like it’s making it go away, but I am sure you are more stressed about it than your conscious will admit. It’s time to face the truth about what is going on with your financial health. Maybe you are ignoring it but you are in a good spot and didn’t know it. Hello, Relief! But maybe if you took a look you could see a way to be in an even better position and you could reach your goals even faster. Or maybe you really do just need that wake up call. We are not getting any younger and our retirement accounts don’t just appear out of nowhere.
Let’s start with some basic budgeting. We all have an idea of what to do. But are we really doing it? We need to. And sure, there are apps that you can just enter your bank account information into and it tells us a budget, but you need to do the dirty work yourself first, and use those to maintain. They are great and helpful, but if you don’t know the basics, how can you expect to make advanced level decisions.
The first place to start is look at your paycheck, if you have one. If you have a variable income, move on to the next step. Next, you need to figure out your fixed expenses. Fixed expenses are the ones that you MUST pay monthly or possibly quarterly and are the same cost. These include:
- Housing (mortgage or rent)
- Insurance (home, health, life, car) note that some of these may be lumped onto something else. Your mortgage may have you home insurance as well as the property tax. Your health insurance may be deducted from your paycheck.
- Loans (student, car, other)
- Utilities (cable, gas, electric, water, etc.)
- DEBT – this is the hard one, but it needs to be looked at.
You can now start to see where your money HAS to go every month. In an ideal financial planning world, this has only taken up half of your income. If not, that is why we are looking at it!
Next you need to start thinking about your variable expenses. These include things like:
- Groceries
- Gas
- Clothes
- Entertainment
These are the areas where you can make your budget work for you the most. Occasionally these expenses are recurring, but if they aren’t necessary, let’s keep them at the bottom of the budget such as your gym membership or your streaming services.
At the end of all of this, there will be three options. You have extra money (yay! Let’s save!), you are even and are living paycheck to paycheck (along with 3/4 of your neighbors), or are spending too much (again, shy of half of your neighbors have credit card debt so you’re far from alone).
You also may look at this and scratch your head. You SHOULD you have $200 left over every month, but you can’t seem to get your credit card paid down to zero. You need to sit down and really look at how you’ve spent your money to see if it is fitting into the categories you created. Maybe you didn’t realize you have a Netflix account for $15 but you only use it once a month. Or maybe you didn’t realize all of those $6 lunches a couple times a week and the $4 coffees you don’t really think about were actually adding up to $100+ a month.
Hopefully this exercise helped you to see where your money is going currently, but most importantly where your money SHOULD be going. I know I took a long look at my budget and realized we eat out way too much and it’s not just affecting my wallet, if you know what I’m saying.
Now that you know where the money is going vs where the money should be going, you can tackle your debts or if you are lucky, work on saving. Tackling your debts will be one of the hardest money issues you will face, but you need to look at it head on. Stare those numbers in the eye and let them know you WILL figure this out. You have your new budget and can focus on sticking to it. You can also see areas where you can improve your spending habits and potentially save some money. Take those coffees and lunches for example. You can start bringing your lunch which may only cost $2 a day and get coffee in the break room for free. You’re now potentially saving $80+ with that simple change. That’s potentially $80 more towards paying off your debt.
Once you have a plan in place, your financial issues will seem much more manageable. You’re starting to tame the beast. You didn’t start running overnight (from infancy OR a couch potato), so don’t expect that of your finances either.
If you’re looking for some help on creating your budget, I have made these simple budgeting sheetsthat also have debt payment plan, savings plan, and expense trackers available you can print as many as you’d like! Basically budgeting 101 for life.
