Budgeting, managing your finances, and making your money work for you instead of the other way around is something I’m incredibly passionate about! More importantly, I’m passionate about teaching it to others, especially those of us in our twenties who are on the teeter totter of real adulthood and real money.
Money is what holds a lot of our life together. It is why we choose certain jobs, why we move certain places, don’t do certain things we might want to do, the list goes on and on. Money can entangle and depress us or, if used correctly, can give us more freedom than anything else! I believe the key to that is budgeting, and budgeting well. I know this and thats why I want to reach out and help by helping you create your first budget that works for you!
So let’s get to it!
Also, I’ve put together a little bonus workbook to go along with this post that you can get at the bottom of this post! :)
How To Figure Out Your First Budget
FIGURE OUT YOUR INCOME
You can’t exactly figure out a budget without first figuring out how much money you have to work with. You need to factor in how many hours you work every week and on average how much you make per hour. Make sure to take into the account how much comes out for taxes, and to NOT include any bonuses you might get throughout the year, that is not part of your income.
If your income fluctuates, round down. Make your budget for the lowest amount you make so that you are always within your means. If your response to that is that the lowest amount you can’t live on, then you need to change to a job that won’t ever have you that low financially. :)
FIGURE OUT YOUR BILLS
This might seem like a no brainer, and it is, but you’d be surprised how many people go through their life with never really writing down and keeping track of how much their bills are each month. Guessing or estimating does not work for setting a budget.
Bills I define as things that you need and can’t really be changed. So housing (rent or mortgage), car insurance, health insurance, etc.
Also if you have any debt (such as school loans, or the double c-word, credit card) that you need to be paid off, this should go under your bills as well as that should be being paid off monthly!
FIGURE OUT YOUR EXPENSES
Now, expenses I define as things that may be necessary but the amount could be changed if need be. So things like groceries you need, but if you are low on money you can lower that amount budgeted for them. Or your electric bill if becoming too high, can be lowered by lowering the heat and putting on socks instead. These are just examples of what I mean by expenses. Yes heat and food is a need in order to live, but you do have the option of how much heat you use, and what kind of groceries you buy and at what price. Therefore they can be changed in your budget.
Things like clothing, out to eat, entertainment, and household supplies would also go on this list, basically things that you have control on how much you pay based on how you use them instead of bills that are a set amount, like rent. Figure out about how much you are able to budget for each item or category.
FIGURE OUT YOUR PRIORITIES
This is important because this is what will make your budget your budget. Everybody has different priorities and therefore different things that they wouldn’t mind taking a cut on in order to afford some other category.
For instance I’m extremely careful with money and don’t over spend, but one thing I will spend a little bit more on (aka, budget a little bit more for) is things for my face. I’ve had pretty bad skin since I was young, so over the years I’ve always bought the nice face wash, been on medication that cost money, and bought the nice concealer for my skin. How am I able to do this on a minimum wage budget? Because I don’t spend a lot of money on other things like brand name clothes. I take a cut on another item, clothing, and make room in the budget for the expensive concealer.
That is why having priorities is important. Of your expenses listed, decide which ones you really care about having. As your making your budget have your priorities reflected. If you want to increase any categories, make sure you are taking away somewhere else in return. With of course, still having money to put away for savings each month! ;)
This is not an excuse to over spend/budget or splurge because it’s important for you. If you are at a point in your life where you can’t afford anything really then this might not apply. Use this method wisely and with the best end result in mind!
FIGURE OUT THE MATH
Now is the part where you have to get out your calculator and probably do some erasing and rewriting. Start figuring out how much you need to live and how much you need to live comfortably. Take into account your debt if you have any and make sure you are making room to add to savings each month, even if it’s just a little bit.
Take time and don’t rush. If this is your first time sitting down to do a budget it’s going to take time. You most likely will go through the emotions of frustration, dissappointance, annoyance, and probably get majorly discouraged (unless of course you are a millionaire). You might even feel like just giving up because there is no way you can live like this. But I promise you, it can be done and if you stick with it, you will be building yourself a life that you love in the long run!
Also, I’m totally rooting for you, so there’s that. ;)
FIGURE OUT YOUR WHY
How do you not give up? By finding your “why”. Finding your reason for doing this, your reason that when you think about it, it kicks you in the butt and makes you keep going! It is so important to figure this out in the beginning because in the middle of not being able to go out to eat, or having to put on extra blankets instead of turning that heat to high you aren’t going to feel like doing it.
Like anything, the results come later and not in the moment and that can be hard. Having your “why” to go back to and remind you why you started this challenge will help you immensely when you are in the thick of it!
Need more help!?
I’ve put together a little workbook that I’m offering to all who are ready to start taking charge of their finances and make a budget that works for them! Get it below! :)