We are only a few days (heck, few hours) into 2017 and I’m sure you’re already feeling a little anxious about those goals you set. How easy we let ourselves slip from those goals so carefully set at the beginning of the year. Yes, those goals feel exciting at first, but even after a few days in I’m sure they can feel tiresome and you question all reasons to why you create new year’s resolutions in the first place. Especially if your goal was to spend less or be better with money.
My friend, let me help you out a little bit!
It is never to let to set a budget for yourself, especially if you've been feeling the nudge to finally do so. A few weeks ago I shared these budgeting tips in my newsletter, and now I’m excited to share them with the rest of my readers! Here’s a step-by-step process of how to set a budget for your 2017.
Evaluate your current expenses
The first step to even setting a budget is seeing where all of your money goes. Sure, most expenses are going towards rent, bills, or even debt payments. But the rest? I bet you have subscriptions being pulled from your account month-after-month that you completely forgot about, and you are steadily losing that small income without even realizing it.
Take some time to seriously take a deep dive into your monthly expenses. The first step into fixing a problem is admitting that there is a problem, which would require for you to see for yourself the damage that is being done. Yes, this also means random take-out food expenses and new phone case splurges. The best way to do this is going through your checking account or credit card bill step-by-step. Here is a guide I made for you to break it all down:
Weed out the expenses you don’t need
I’m sure after taking a look at your previous month’s expenses you are feeling a bit upset about your spending habits, maybe even a little bit shameful. Don’t go down that road! Instead, cross out the stuff that you know you don’t need. For example, do you really need a monthly membership for Spotify and Apple Music? Instead of spending money on both, choose one and save upwards of $100 by the end of the year! Go through your expenses and figure out the difference between what you need and what you want, and what you need to stop spending an excessive amount on...
Make your new budget
We are going to walk through what is commonly known as the 50/30/20 rule. Haven’t heard of it? It’s a simple financing method coined by Senator Elizabeth Warren. She developed this rule to teach others how to properly handle their finances without abusing their paycheck month-by-month Here’s how it works: 50% of your finances are for essentials, 30% for entertainment, and 20% for savings.
For some who are on a tight budget (like me), having the luxury to spend 30% on entertainment every month is not an option. Depending on where you live, having any type of entertainment or savings budget can seem pretty impossible. However, if you are in the situation where income is consistent (even if it isn’t much of an income), here’s an example of what the 50/30/20 rule can look like for you:
Obviously everyone's budget will look different depending on where you live, your income, your marital status, and what is required as your "essentials." Maybe having to pay for medical prescriptions is or isn't an essential, while transportation could mean gas or a subway card. Maybe you are lucky enough to not pay student loans, which means more can go in your long-term savings.
The 50/30/20 rule may or may not work for you, but it's an easy place to start when trying to determine how much to spend on what when it comes to making a budget.
Create a recording system
Right now Oliver & I track our finances through Mint, an app that automatically tracks and categorizes your spending, and it works well for us. However, what works well for us may not work well for others. If you're one who needs a bit more accountability (aka actually logging in your expenses by hand) I also recommend trying the Best Budget app or even creating an Excel spreadsheet of your own.
As you keep your budget, remember why you started in the first place
Honestly, what keeps me going when it comes to keeping our budget is knowing where I came from. I used to be reckless with my money, but after a few breakdowns in college with super low bank account numbers, I knew I needed a huge change. Keeping a budget is probably one of the hardest things I've ever had to do in my life because it requires a lot of discipline. However, what keeps me going is remembering where I came from - which is honestly the best thing you can do for yourself. Set some sort of reminder or goal for why you are creating this budget in the first place. Maybe even hang it somewhere for you to see every day! It will absolutely help in those weak moments where all you want to do is online shop or be tempted for a late-night taco run.
If you're looking for tips, here's some pointers on how to apply discipline to your budget.
I am for sure not an expert in budgeting, but Oliver & I are happy to help you with any questions you may have, so feel free to email me if there's something you are confused or having a hard time with towards your budget!
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Photo Credit: Anjeli Lundblad / Unsplash