Budgeting for dummies
Keeping track of what’s in your wallet can be hard if you don’t know where to start. Maybe you work inconsistent hours, you overspend, you work multiple jobs, everyone’s different. As a recent college grad, budgeting is something that I’ve had to learn how to do in recent years. And if I’m being honest, it’s something that I still struggle with from time to time. Whether you’re like me and a recent (or soon-to-be) grad, or if you’re starting a little later in life, let’s take this time to learn how to budget together. Here’s a list of the top eight most important steps to understanding how much you make and where to spend it, according to me: another average adult.
Learn how much you really make in a month.
One of the hardest things for me to do when I started learning about how to budget was knowing how much I actually make. I don’t work a typical 9-5 job or have a regular salary. At the time, I worked as a typical part-time student assistant, where my hours weekly would change as needed. During Winter Break, I could work up to 40 hours. If it were finals week I would work less than my normal schedule. It was sometimes hard to keep track of. But it was one of the most important things for me to do. If you want to start budgeting, you need to know how much you make so you can plan where to put each penny towards.
Figure out what your current spending habits are.
No, this isn’t going to be me judging you for buying a Starbucks coffee every day, or eating avocado toast when you could’ve had cereal. It’s essential to know how much you spend in a month so you can decide for yourself what things you can cut back on. Maybe that is changing a daily coffee to a cup once a week, but that could also be canceling your gym membership since you only use it once a month anyway.
Research different budgeting methods.
“A budget is telling your money where to go instead of wondering where it went.” — Dave Ramsey
There are tons of systems to keep track of your money: 50/30/20, using envelopes, Dave Ramsey’s zero-based system, and more. Each one has its own sets of rules and ideas, so you can personalize them to you. The 50/30/20, for example, has three steps to follow. 50 percent of your monthly income will go to needs, 30 to wants, and 20 to your financial goals or savings. What you choose as your wants and goals are up to you. Whereas with the zero-based system, you end each month with $0 left.
Try out an app.
Don’t want to write out your budget from scratch each month? Don’t worry. There’s no need to relearn Microsoft Excel or draw a new chart in a notebook each time. There are plenty of different apps that can help keep you on track, including Mint, Mvelopes, Qapital, and EveryDollar. Mint is probably the most well-known and well-used, and it has been featured by many magazines and newspapers such as The New York Times and Business Insider.
Set goals for your savings.
Setting goals for what you want to achieve is helpful, and we do it for everything else, why not for our budget? Maybe you have student loans you want to pay off, or maybe you’re saving up for a post-COVID vacation in Hawaii. Whatever it is, keeping note of that can help you decide where you want to spend your money and how much you should put into a monthly savings account.
Get to know the language.
What’s an emergency fund, and how do I know if I’ve fulfilled it? What are sinking funds? How is that different than saving funds? Knowing the different types of money-saving terms can help you determine what is best for you and where to put your money after you’ve made it. It sounds confusing, but there are tons of websites and books that explain these terms; it’s just one google search away.
Keep checking in.
I have the bad habit of creating a monthly budget for myself and completely forgetting about it by the 31st. But news flash: that’s not how it works. Check your plan throughout the month so you know where to put your weekly paycheck or you know how much you have left for your eating out budget.
Don’t beat yourself up about it.
While it’s important to keep track of your finances, it’s important to remember that things happen. Sometimes you have a stressful month and go over budget treating yourself. We all make mistakes. You might not get it the first time you start budgeting, and that’s okay. Just keep practicing and, like any hobby or tool, you’ll get better the more you learn.
Most importantly, according to Leslie Tayne, author of Life & Debt, “budgeting has only one rule: do not go over budget.” Keep track of the money you have, make a goal for where you want to put it, and make sure you follow that.