Happy Monday, readers!
This week’s post is going to cover all things budgeting: planning a budget, actually creating one each month, and sticking to it!
This is a topic that’s extremely important in your twenties. Whether you’re in college and balancing a small amount of money to live off of, you’re at your first job with a real paycheck and don’t know how much to spend and how much to save, or if you’re moving out and on your own and need to pay rent and utilities while still having a savings and some extra spending money.
The first thing you should do to get started is to lay out both your income categories and your spending categories. To help you guys, I’ll share mine with you. You can be as specific or general as you’d like. For example, you could have a spending category for beauty and have sub-categories such as makeup, hair, nails, etc…. But I’ve found that keeping it more high-level helps you see everything on a broader scale and also makes it less complicated. I recommend trying both out and seeing what works best for you.
Here are the income categories I use:
Here are my spending categories:
- Loans – Aka where the majority of a 20something’s money goes. UGH!
- Restaurants – I’m not a big drinker, but if you go out a lot, I recommend adding a separate category for alcohol to keep track of how much you’re spending each month at the bar, that adds up quickly!
- Accessories – This includes jewelry, shoes, purses, etc.
- Home – Anything from home maintenance to furniture
- Medical – I prefer to have this as one group and have it include prescriptions, doctor visits, drugstore purchases, etc.
- Travel – This is one you might want to break up if you travel often. You could break it up into gas, airfare, transit, hotel, parking, car rentals, etc.
- Gifts – For the occassional extra money you might get on your birthday
- Office Supplies – I like to spend too much money on notebooks 🙂
- Misty – Pets are expensive, fyi! I use this for trips to the vet, dog food/supplies, and grooming.
- Car – Includes monthly lease payment and any service or repairs I have done.
- Electronics – Could consist of actual new gadgets, any software or apps you buy, etc.
- Entertainment – You could break this up into movies, concerts, books if you buy a lot of these. I just group it all together and it includes Netflix subscriptions, the occassional concert, any movies I see, books I buy on my Kindle.
Once you have your categories laid out, you’ll need to determine where you want to manage your budget. Here are some options…
- Pen and Paper/Notebook
- Excel or Google Sheets
- Smartphone and desktop apps
If you’re someone who always prefers a pen and paper, the answer is a no-brainer. If you like spreadsheets and want to keep it simple and neat, give that a try. If you’re like me and have your phone with you at all times — it’s practically glued to my hand — try downloading a finance and budgeting app.
These are my favorite apps:
- YNAB (You Need A Budget) – This one is great if you’ll be primarily managing your budget on your computer. The mobile app is good for entering purchases on the go, but you’ll want to use the desktop version for setup and to see your trends and data.
- Spendee – This is my personal favorite and the one I use. You can access your data online, but the mobile app is very cohesive and has a clean and friendly user interface. Also, I’m a very visual person so I greatly appreciate all the color-coded graphs and trendlines to show your spending habits. It’s a free app, it’s easy to set up, and lets you add purchases online, on your phone, on your tablet, and on your smart watch.
- Dollarbird – This app is set up like a calendar, so you can see your spending for the month right when you open the app. I preferred the classic version (which is still available in the app store) because I liked the simpler interface. The new version is collaborative, which is great if you share your budget with your significant other or a family member!
- Mint – If you want an app that does it all and also does all the work for you, Mint is the obvious answer. You connect your bank accounts, loan providers, investment and 401k providers, etc. and it’ll sync in the background and keep all your information in one convenient place. I personally perfer to be held accountable for entering my purchases manually into an app so I’m always conscious of what I’m spending and how close I am to reaching my budget, but this is a great starting place if you’re not ready for that commitment just yet and want to keep an eye on your spending habits. It’ll also email you a weekly summary of your spending trends and you can set email or in-app alerts to notify you if you’re spending more than usual on a specific category.
So you’ve downloaded the app you want to use or laid it out on paper or in a spreadsheet and you’ve set up your categories, now what do you do?
First, take a look at your bank statements for the past two or three months and try to put them in categories. How much did you spend per month on each category? Once you’ve determined that, assign an amount you want to budget for each category. Keep an eye on your total income amount each month and make sure you’re setting a realistic amount for each category.
Next, based on the amount of money in your income you have left over, determine how much of that you want to put into your savings each month.
Third, keep in mind if you have any big events you need to put money aside for. Do you have a vacation coming up and you know you’ll be spending more that month? If so, try and lower your budget for the months leading up to it.
Forth, track all the purchases you make. Either keep all your receipts and log them in your app or in your budgeting tool on a daily or weekly cadence, or try and log it right on the spot to make it a habit.
Fifth, at the end of each month, evaluate how you stacked up against the budget you set, look at your trends, make any adjustments for the following month.
Last, just keep it up. It will definitely be a lot for you at first, but after you get in the habit of logging your expenses or monitoring your budget, it’ll become second nature and you’ll be a professional budgeter! Just think of how much less stress you’ll have on your plate when you don’t need to worry about whether or not you can splurge on those new jeans you’ve been eyeing up for weeks!
If you have any questions, or have any recommendations you’d like to add such as great apps you’ve tried or other helpful tips, feel free to comment below!