So, how do I budget
I have tried every tool in the books. I’m telling you at the end of the day, the best way to budget is the way that’s best for you. However, I want to layout a few of the basics as well as some of the “formulas” that can help you make money work when there is more than one person.
Currently I use a spreadsheet that is catergorized into the big categories for my family. Housing, Kids, Transportation, Extracurriculars, Vacations. Of course, some people will have differnt categories, but I do it becuase I formed my budget on the 50/30/20 budget. The idea is this. 50% of your budget should be needs. 30 should be wants, and 20 should be savings. I do not fit that precentage due to having a herd of children all in daycare at the moment, but when my projected childcare decreases, we should be closer to that budget.
The first step is actually tracking, not budgeting. Numbers can look however you want on the page, but until you track the money, either with some tried and true dillegence (good for you, don’t brag) or using apps or one credit card like the rest of us, that’s the best first step. Monarch Money, You Need a Budget, or EveryDollar are a few I’ve tried. Some have more robust features than others. I can go into detail about the comparison of these apps in another post! But the goal, is to track, where is the money going, and then we cand start to adjust in ways that are reasonable and manageable.
If you’re like me, and you go into things hot, like, red hot burning a hole through the floor we’re all on a budget right now and will have no choice but to burnout because we’re so gung hoe on this, then please, read the following basics to implement your budget.
Calculate Your Income: Determine your total monthly income after taxes. This is so much less than your pre tax, so literally look at your bank account and see what you’re actually getting deposited into your account. Include all sources of income including wages, freelance earnings, and any other regular income.
List Your Expenses: Track your spending for at least a month to understand where your money goes. Hello. Like I was ranting about above. The best part is that a budget can change. You do your best with what you know, and keep learning. Categorize expenses into fixed (rent, utilities, loan payments) and variable (groceries, entertainment, dining out, or at the very least, just a line item for Target and Amazon).
Set Financial Goals: Define short-term (e.g., saving for a vacation), medium-term (e.g., buying a car), and long-term goals (e.g., retirement savings). This helps prioritize where your money should go. I for example, have vacation broken out into three types, one for him, one for me, and one for our family. I do like to try my hand at travel hacking, more on that in this post, but essentially I set aside enough money to do something easy and fun once a year, because memories matter. I actually roll this money for larger goals into different savings accounts. For the car, we have a rolling 8-9 hundred every month to avoid having a car payment for the rest of our life (please lord, halleluiah)
Create a Budget Plan: Allocate your income to cover your expenses while aiming to save and invest for your goals. This is where that rough 50/30/20 budget can come in handy. Use budgeting tools, you can literally look up budget in excel or apps Monarch Money, You Need a Budget, or EveryDollar.
Monitor and Adjust: Regularly review your budget to see if you're staying on track. Adjust as needed based on changes in income or expenses, additional kids, quitting your job to go back to grad school, ect.
Emergency Fund: Aim to save enough to cover 3-6 months' worth of living expenses in case of unexpected events like job loss or medical emergencies. This can literally just start small, what is the bare bones budget, Dave Ramsey does a good job of that, what are the four walls as he calls them, the food, shelter, utilities, transportation.
Debt Management: If you have debts, allocate a portion of your budget to pay them off systematically. Focus on high-interest debts first (e.g., credit cards), but the most important thing is to create a plan to pay them off, no matter how you choose to do it.
Seek Professional Help: If needed, consult a financial advisor for personalized advice on budgeting, saving, and investing. Make sure that they are a CAPTIAL F Fiduciary. For the love of God, also make sure it’s not that guy or girl who went to college for sports and is selling you life insurance instead of actual financial advice. You can also pay an advisor a flat fee instead of a percentage to pay them for knowledge without handing over investments.
Consistency, reasonable expectations and discipline are key to successful budgeting. It may take some time to find a budgeting method that works best for you, but the effort is worthwhile for achieving financial stability. Which you and your family deserve.