Yes, I said the “B” word… Budget. Honestly, does anyone really like talking about the “B” word? Nope. I’m sure we all wish we had endless amounts of money and never had to worry about budgeting. Or maybe that’s just me? I highly doubt it though…
I’ve been thinking about writing this post for several months now, but it’s been HARD. I’m the first to admit I’m terrible at budgeting. Just ask my dad! I remember about 5 years ago, a few years out of college and thought life was awesome being on my own and being a grown up. Wrong. I finally had to sit down with my dad and figure out what I was spending, why I was spending, and how I could save?
Nobody teaches you how to budget once you’re on your own. I’ve wondered so many times why there isn’t a college class on “#adulting”? Seriously. Don’t get me wrong… I had to work in high school and college if I wanted to spend any extra money on things. Most of the time that extra money went to my shopping habit. Well, that shopping habit still gets me every month!! Just look at the red line on my computer…it’s my clothing budget :/
So what are the tips I’d give my 25-year-old self? Keep it simple, don’t freak out, and take it one step at a time. Here are my suggestions!
5 Tips to Start Budgeting
List out all of your expenses in an Excel spreadsheet or hand write them.
I’m even talking about the $4 Starbucks coffee, tampons, dog grooming, etc. Literally everything… Print out your bank statements from the last year and really look at where you spent your money. It’s kind of terrifying if you’re like me, but it will help you in the long run.
Once you’ve listed out everything you’ve spent, then you want to list out your sources of income. In my Excel spreadsheet, I have each month listed out at the very top. Then I list my income > business expenses > personal expenses > taxes and savings > disposable income.
I then use a formula to find my net income (total revenue – expenses) for the month. From there I take out whatever I need to save in taxes, IRA account, and personal savings. For taxes, I take out about 30% and for my IRA account and personal savings I take out about 5%. Obviously, some of you won’t need to worry about taxes and an IRA account so I’d suggest trying to put back 10% each month for savings. But, if you can’t do it don’t freak out! Even a little can go a long way…
Get a credit card
That’s right. Get a credit card. NOT several credit cards…just one. I started with one credit card in college so I could build up my credit which is important as you get older and want to buy a house or car. Also, the reason I think a credit card is important is that I can guarantee you’ll have an “emergency” situation at some point after you graduate.
For example, I’ve had been dealing with some major tooth issues over the last 4-5 years. Guess what? Dental insurance sucks. Even with what insurance covered I have still had to pay a total of about $10,000 for all of my procedures!! Clearly, I don’t have that kind of money lying around, so how else would I be able to get the necessary procedures without a credit card?
Fair warning… Be very very careful with credit cards. It’s super easy to swipe, swipe, swipe. They have been very helpful for me, but if you have to leave it at home so it’s truly only there for emergencies.
Use an app to track your budget
In addition to creating an Excel spreadsheet, I use an app called Quicken to manage my personal expenses. There are several other apps out there like Mint and more you can check out here. However, I really like Quicken because there is a desktop version and mobile app version.
You can also do things like paying your bills directly from Quicken along with so much more! Personally, I really like it most because of the layout and the daunting RED lines you get if you go over your budget for each category. It makes me feel guilty!
I only use Quicken to manage my personal expenses because now that I have a handle on using credit cards, I put all of my expenses on my credit card then pay it off each month. So every day I open the app and check to see where I am with my budget for the month. If you can make this a habit (set an alarm on your phone if you need to) each day it’s going to help keep you from swiping when you don’t need to.
The envelope system
If you’ve never heard of the “envelope system” it’s one of Dave Ramsey’s best tips. Like I’ve mentioned, it’s very easy to get carried away with swiping your credit card. Several years ago when I was getting my budget in order, I had to use the envelope system so I could control my spending habits.
Basically, you withdraw the exact amount of cash you need each month for things like gas, groceries, restaurants, happy hours, etc. Then when the cash is gone…it’s gone! It’s a LOT harder to hand over cash than a credit card. Then whatever cash you have left over at the end of the month it’s a reward!
Save when you can…
Saving is never that easy. When I set up my personal checking account I set up a savings account too. However, there was never any money in that account! Any time I’d put a little away, I felt like it was a treat so I’d usually go buy a new handbag (#struggleisreal). After a couple of years strictly enforcing my budget, I finally had some money in that account.
It’s said that you should save 20% of your monthly income, but sometimes that is just not doable. Personally, I would try to save 5-10% starting out and build up each month or year. I’m an entrepreneur so there are several months where there is zero money left over to save. It just happens… So I started out with trying to save at least 5% each month and then added 1-2% each month that I got some extra income.
If you’re paying off debt or college loans you may not be able to save for a while. My personal suggestion… Get a side job. It doesn’t have to be something extremely time-consuming! I’ve babysat or recently I’ve started re-selling my clothes on Instagram and Facebook groups. Any extra money I make from that I dump directly into my savings account. Even if it’s only $20 I promise it’ll make you feel SO good!!
So why am I writing this post at the end of the year? Because we are going into the most expensive time of the year so isn’t that a good time to test yourself?! If you can start budgeting during the holidays then you will definitely set a habit and be prepared for 2018!
It won’t be easy… You may have to say “no” to a few things this holiday season. However, that heavy feeling on your shoulders after the beginning of the year most likely won’t be there!
So there are my 5 Tips to Start Budgeting! Can you do it?? Yes, I promise you can!
photos: Beckley Co.
I love that you did this post! I am in my 40 s and often think about how hard it must be for young women to budget these days.
With low interest rates, bank depot cards and credit card where you never have to hand over actual cash to get a sense of what you are truly spending! Also, all the social media today puts all of the shopping temptations in front of your face every day!
Good to see a young women, who likes nice things, but with a sense of priorities!
Great tips and posts! I’m still relying on family support while saving a huge chunk of my check until I can get another job. It’s tough being 25 years old and barely finding jobs that support a livable income. I think every person needs to hear this message on saving and budgeting. I see so many people my age in 6 figure debts just from credit cards!