In this 3-5 minute Guest Post!
- Why do I need a budget?
- What do I need to manage a budget?
- What does a budget look like?
- Building a budget
Do I need a budget?
Let’s talk about everyone’s favorite subject: budgeting. It doesn’t have to be intimidating or constricting. Building a budget can actually pave the way for helping you grasp bigger goals that seem out of reach of your current income. They help you prioritize your financial goals and figure out a timeline to get there.
Budgets are not one size fits all, and half the battle is finding one that works for you. It’s important to realize where your money is going to ensure you are making the most of each paycheck.
Where do I start?
There are a number of apps (such as My Budget Book or Money Mgr.) that are helpful with giving you visuals of where your money is going. You can also use a spreadsheet or do it the good old analog way.
While putting together your budget, look at past credit/debit card statements and think about the financial goals you have. Keep in mind that you’ll have both short term and long term financial goals to consider when finding the budget that works for you. That is why you have to re-evaluate at least every month to ensure you’re staying on top of your goals. Look at examples online and consult with friends you trust about what works for them. When you make a budget for the first time or restructure the one you have made, give yourself some time to settle into it.
What does a budget look like?
Look at Liz for example, she earns a monthly adjusted income of $2,000 which ends up being roughly $1,000 per paycheck since she gets paid biweekly. Her rent is $600 which includes utilities. She allocates $300 each paycheck for rent, puts $200 away for savings, plans to use $100 for groceries and invests another $150. This leaves $250 each paycheck of discretionary funds that can be used for whatever she wants. She plans on saving for a new phone and begins putting away $100 dollars every paycheck for it. She routinely spends another $50 on new clothes, and allocates the last $100 to social events and going out. Zach has talked about the awesome tool of compound interest on this blog so keeping yourself in your budget allows you to take full advantage of that option.