Everyone says you need to budget, but rarely do they show you how to do it. This is one of the many conundrums we as millennials face. We know we should budget, we know the benefits of budgeting and yet we have no idea how to do it! Well you’re not alone! According to a Gallup poll, two-thirds of Americans don’t keep budgets and I’m willing to bet it’s because they don’t know how to. So today, we’re going to learn how to set up an easy budget that will help you get started.
Some Benefits of Budgeting
- Prevent you going into debt or being bankrupt
- Help you pay debt off faster
- Keep you financially stable so you don’t have to call home for money
- Allow you to save up for the things you want like game consoles, vacations, new clothes, and cars.
Creating Your Budget
The easiest way to keep a budget is in a spreadsheet. You can use Excel, Google Sheets or any other similar software. If you’re not comfortable with those programs, you can always create a table in a Word document and use that. The purpose of the table/spread sheet is to easily identify where numbers should go and give you an easy representation of how you’re doing.
Next, you’re going to want to set up your axis. I like to put the months across the top and my categories across the side.
Create categories based on what you spend money on each month. I like to have a household (for things like soaps and paper towels), food, fun, rent, gas, miscellaneous and utilities and insurance. Now some of you won’t have all of those categories and some of you will have more. Decide what categories work best for you. You can be as specific as “Kitchen Supplies” or as general as “Household Stuff”.
Lastly, don’t forget to personalize your budget and make it interesting! I like to make the month boxes different colors for each month.
Setting a Budget
The basics of this is simple: don’t spend more money than you’re making. If you’re in college, this is hard to do since many don’t work, or if you do, you’re not making a whole lot. That’s okay, just create a budget that allows you to live within your means. This means you may need to cut back on the nights out and expensive toys.
If you’re not working, it’s harder to set a budget. You start by observing your spending habits and decide what a reasonable budget is for you. Most college students I know can eat happily with only $25 a week for food and $20 a month for household and gas. But depending on where you live and what your lifestyle is like, it may be different.
Keeping Your Budget
Now that you’ve created a budget, it’s time to start keeping record of your purchases. A good way of doing this is to keep all the receipts you get or check your bank account for the charges. I personally like the paper receipts better because most times I buy household items and food together and I don’t want to record them in only one category. Having the receipts makes it easy what each item costs so I can get the exact number instead of trying to guess.
Try to update your budget once a week or every other week. This helps you keep track of your finances so you know what activities you can attend without breaking the bank.
Now I know that remembering to update your budget is the hardest part of keeping a budget. What has worked for me is to pick one day of the week to do my budget and do it on that day every week. For me, that means that every Sunday evening I sit down with a pile of receipts and quickly put the numbers in. It takes about 5 minutes to do everything, so it’s not time-consuming.
Since updating your budget regularly is the most important part of budgeting, don’t worry about making a complex budget or one that requires lots of maintenance. Just getting into the habit should be your goal. Once you’ve got that down, you can move on to the next section and learn how to make a more comprehensive budget.
Already Have a Steady Budgeting Habit?
It’s time to move on to something a little more sophisticated. The first step to a more sophisticated budget is to hold to it. At this point you should know how much money you need for each category to live comfortably, but not extravagantly. Now is the time to have that average as your total for each week or month. This is where budgeting really comes in. It’s best to write these numbers down. In my budget, I write them next to the category name, as seen below.
Another way to make your budget more sophisticated is to have a Gain/Loss category. This is where you total your income for the month and your total expenses and see how well you’re sticking to the budget. To do this, you need three new categories: Total, Income and Gain/Loss. Total is your total expenses for that month. You can calculate this manually with a calculator or type into the field =SUM(first data number:last data number) [ie =SUM(C2:C9)]. Your next category should be Income, which is your total income for the month. Gain/Loss is taking your total expenses minus your total income. If it is a positive number, you know you have some money left in your budget. If it’s a negative number, then you’ve over spent. Here’s an example from my personal budget sheet.
Thanks to Jessica for inspiring this post!
What do you think? Did this work for you? What did you find helpful or confusing? Comment below with your thoughts and experiences; and make sure to comment or message me with anything you want to know more about.