Let’s talk budgeting. While not the most exciting of topics, it is one of the most important ones – especially if you’re just starting out. It does not have to be sad, draining, or boring, you just have to be consistent enough to make it a habit. It can’t be boring if it’s part of you – you’re not boring, right? Thought so. You should see budgeting as a way of planning for your money to help you reach whatever goals you may have. What do you want? Long-term? Short-term? A vacation? To retire at 30? Whatever it is, budgeting can allow you to achieve it.
Whether you’re a pen and pad kind of person or a lover of everything spreadsheets, the principle behind budgeting entails organization, planning, and commitment. Spreadsheets are arguably easier – you can even have both! First things first, what are your goals? What do you want to do with your money? This helps give you a sense of direction. With that in mind, you can then pick a budgeting method. Two easy examples are the 50-20-30 principle and the zero-based budget method.
50-30-20
This method allocates the money you receive into percentages: 50, 30 and 20. 50% goes to your needs, 30% is allocated to your wants, and the remaining 20% goes to your savings. In your needs are the recurring monthly expenses like rent, utility bills, mortgage payments – basically every necessary expense that needs taking care of to sustain yourself. Wants are the things you may need, and savings are, well, savings.
Zero-Based Budget
This method allocated every single dollar to a predetermined purpose. No dollar is left behind. It helps to have a list of your goals and expenses to help you properly subdivide the money into the appropriate amounts. From rent to entertainment, every single dollar has a purpose and should be used for that and that alone.
So with your paper or spreadsheet in tow and a budgeting method selected, you are ready to start. To make things easier, there are templates online that can help you draw out or structure your budget according to your goals. Of course, this will be different from person to person, but you can start simple.
Expenses
You need to establish the exact amount of money that makes it to your pocket after all the deductions (like income tax) have been made. Remember, a method like zero-based budget makes use of every dollar so precision is a must. With this amount, you can then subdivide it into the various categories you have in your budget structure. Expenses like rent are fixed amounts and are easy enough to fill in. For expenses that may vary like utility (gas, phone, electricity) bills, always estimate on the much higher side.
For new graduates who haven't necessarily started working but have maybe received an offer letter
you, handy online tools like Smart Asset calculator allows you to plug in your salary and then it'll let you know what your take-home is. This is the money you can budget for.
Savings
Saving is important and makes life that much better down the road. The earlier you start, the better. It can be towards your 401K, your emergency fund, a vacation - you can save for anything. While the 50-30-20 method generalizes the savings amount, the zero-based budget helps you categorize the savings and save for each one of them individually. This way, vacation money will never be used to buy that new phone you’ve been dreaming of.
Track Your Money
To be as effective with your money as possible, track your money every month. Make a habit of always being up-to-date with your statements to see how the money you are spending on something could be put to better use elsewhere. And be consistent!
You Could Use a Planner
Budgeting needs some reinforcement in your mind to become a habit. Starting off can be quite the experience, but writing everything down in a planner can help you easily get off the mark. The Vibe Planner does you one better and gives you saving goals and 30-day challenges so that some aspects like saving can really get drilled in. You can also use it to track your monthly expenses, and review them to see if you can use your money more wisely, and your goals especially with the zero-based budget method. Get one here today.