How to start a budget

Today I’m writing to you about the B-Word.

Budgeting. Yuck.

Budget is a taboo word, you either love it or hate it. For some it can seem big and scary like you are about to have to live on rice and beans and give up Starbucks forever.

Well I am hear to tell you that is NOT the kind of budgeting we practice in our household, however budgeting is as extreme as you want it to be or need it to be depending on why you are budgeting. Here are the most common reasons I find people need to budget:

  1. The budgeting for more fun budgeter.
    • This budgeter is just for people who wanna be smart with their money. Very little debt, you have known the ins and outs of credit and financing since you graduated high school. Budgeting just so they are actively saving some money to the side, just to make their lives easier and preparing for the future.
  2. The “I have some debt but I wanna buy a house” budgeter.
    • *Ding, ding, ding!* This is where we are. We aren’t drowning in debt but we have just enough monthly debt to where BIG adult purchases are a little uncomfortable for us. We are also playing the credit game where we pay things off and toggle different things to get our credit where we want. We started budgeting so we could have more wiggle room and achieve the adult goals we have.
  3. The “oh dang why did they let me have a credit card” budgeter.
    • This for those of us that might have opened a credit card at a young age and might have put yourself into a hole where you cannot fathom ever seeing a $0 balance again. This is where you might have to get a little tighter with the purse strings and eat some rice and beans for a little while to get where you want.

So, if you’re at a 1, good for you. A lot of us are at number 2, so that is mostly what I am going to focus on. This is what I have experience with because this is where D and I are at, so this is what I am going to talk about! If you are at 3, this will also help you but you might want to tighten the reins and cut out some of the fun stuff so you can get where you want faster.

STEP 1: Make a list, check it twice.

First thing is first. Write down a list of EVERYTHING you pay for. Include the 2.99 app subscriptions you have on your phone, the Netflix, Spotify, etc. Every penny.

If you don’t know how much you spend on gas or groceries, look back on the last month or two of your card statements and make a round about guess. We budget about $400-450 for groceries BECAUSE I lump everything that comes from walmart into the “grocery” budget. Deoderant, body wash, toiletries, paper products, cleaning supplies, dog food, diapers, etc. If it comes from walmart, walgreens, Kroger, etc. its in that dollar amount. This is what I found easiest for US, but you might be more organized and a line item budget might work better, if you’re a Number 1 or 2 you can probably afford a little room for error.

Some things that WE include in this list are:

-spending money, pick a number, we do about $50 a week, this includes our starbucks, sonic, random app purchases, games, etc.

-gas, I budget way more than we actually need for gas just in case.

-Eating out money, I budget less than we will probably actually spend only because usually we don’t eat out unless D works overtime, I do not include overtime in our “how much do we make” number because it varies so much.

-Credit card payments. Unless you are paying your credit card off every month completely, you should be at least putting $50-$100 towards that so you are paying less interest.

Get a total, write that total down, circle it big.

STEP 2: How much do you make?

Again, if you aren’t sure, you work hourly, or live on tips, etc. look at your last couple bank statements and see what you have been working with. You can get a pretty good rough estimate.

Write THAT number down. Circle it big.

STEP 3: Do some basic math.

Your first number CANNOT be larger than the second. That is common sense, so, if it is then you need to go cross some things off that first list and cancel some subscriptions. If you reduce a grocery budget, or something similar then you have to STICK TO IT. Personally, I would look at maybe cancelling a non necessary app or something before cutting into grocery budgets, that’s harder to stick to.

STEP 4: Make a plan.  

 

  • First, if your wiggle room (also called discretionary income) is LESS than $200. Then I would pick a number, probably at least $50 to PAY towards debt. If you have budgeted spending money and eating out and everything then this should  be EXTRA money, but you don’t want it sitting around in your account or you will spend it. So go ahead and pay off some more of your credit card, pay off or pay on a bill, starting with the one the MOST past due or the one due soonest. THEN whatever money you have left goes into savings. The reason you are not putting ALL extra money towards paying things off is to avoid incurring MORE debt, if something happens now like a popped tire or medical bill then you hopefully will have some savings built up to cover it.
  • Second, if your wiggle room is more than $300 but less than $500. Take ATLEAST $200 and put it towards debt. Take the rest and put it into savings. The only way this option differs from the first is that you are going to hopefully pay off debt and save faster.
  • Third, if your wiggle room is MORE than $600 but less than $1000. You are going to put $400 towards debt. That is really a substantial amount, at this rate you should be making big waves in your debt hopefully. The rest, goes into savings. Depending on how much you are putting into savings, you might want to make 2 savings accounts. The first for incidents like popped tired and medical bills. The second for “fun” savings, like savings that you are allowed to touch if you have a trip or something like that.

Note: I am currently toying with the idea of 2 savings accounts. Right now we have 1 and I never touch it unless absolutely necessary but I think I am about to open another and from each check I will probably put at least $20, then any money from my substitute teaching (a couple times a month) will go in that one, and then all of my cashback rewards. That way it isn’t a burden but it will still accrue a decent amount of money for fun stuff when it comes up.

So, if you follow all these steps, HOPEFULLY you are making some little dents into your debt and you are also actively paying your other bills on time, and eating and putting gas into your car at the same time.

Remember this is just how WE budget, and it works for us. After about 3 months of doing this we have paid of quite a few bills, very positively changed our credit scores, and we are still able to enjoy Starbucks on occasion and have fun sometimes too. This is just what works for us and I wanted to share in case it could possibly help someone else.

 

Let me know down below if YOU have any budgeting tricks/tips that you want to share!

 

Peace be with you,

Kate

 

    

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