Money Matters: How to Budget

You’re a young 20-something, pretty fresh out of college or trade school, and you’ve just nabbed your first big girl/big boy job. You’re finally getting paid some big bucks, and while you’ve spent your first few paychecks splurging on some Louboutin shoes and a new Playstation 5, you’re starting to realize that maybe you should start making a plan for all this new income. You need a budget.

But while you’ve maybe made a budget for an upcoming trip or some family Christmas presents, you’ve never really made a budget for your life. Where do you start?

It may be a little daunting trying to figure out how to manage your saving and spending habits, especially if you’ve never done it before. Which is why I decided to put together this post with some tips and tricks I used when I implemented by first life budget.

DISCLAIMER: Just a friendly reminder that I am definitely not a financial expert—just a lover of personal finance and someone who wants to share some things she’s learned along the way. I actually wrote a blog post earlier this year brushing over a few financial changes and decisions you might run into in your early 20s—make sure to check it out if you’re interested.

How to Budget

Now, you may be thinking to yourself, “Why do I need to make a budget in the first place? There isn’t really anything I want to save for right now. Plus, I know I’m not spending more than I’m making, so why do I need to complicate things with spreadsheets and data?

Most people start budgets for short-term goals—say, for a big purchase they know is coming up. They’ll be a little smarter with their money in the weeks or months leading up to said purchase that way when it comes time to shell out that big payload, their bank account doesn’t feel like it’s taken that big of a hit. Or they’ll put a little bit of money away week by week and use that to make the desired purchase.

In this case, budgets are great for making a plan to save your money. But what people don’t always realize is that this can even be done for purchases you don’t plan on making for years ahead—for example, a house. You may not be thinking about buying your forever home at 23-years-old. But it doesn’t hurt to start saving and budgeting for a hefty down payment. 30-year-old you will be thankful.

Budgeting isn’t just for figuring out what money you can put away to save either. It can also help you figure out how much money you’re spending—which might shed some light as to why you’re always scrambling to find rent money at the end of the month.

All of this means that the first step to creating an effective and efficient budget is to track how much money is coming into and out of your hands—AKA, how much money you make and how much money you spend, preferably month to month. I would suggest tracking this for at least a month, but definitely 3-5 months to really see some trends and make better financial decisions based on the data that presents itself.

Start by making a spreadsheet—digitally or by hand—and make it as detailed as possible. You can always cut down your work if you find it excessive. But if you’re really looking to make some financial changes or set some financial goals, then being more detailed is always better than missing numbers here and there.

I like to add notes and color-code certain expenses that are know are repeat or business expenses, so I know exactly what they’re for. I divide my expenses into several categories as well—including “transportation,” “food” (AKA, groceries and/or restaurant meals), “travel,” and more. At the end of the month, I can look at all these notes and make conclusions as to where I maybe need to cut back my spending and where I can maybe spend a little bit more if I need to in the next month.

This is honestly the best part of budgeting for me. It takes a bit of work up front, but I love getting to see how much I’ve spent versus how much I’ve made and implementing financial plans based on that data. I mean, I’ll be honest, sometimes it is a little disheartening to see the results—especially when you realize that you’ve spent way too much money on Starbucks coffee in one week—but it’s so eye-opening that I’m always very glad I did it.

And once you can estimate your income and expense rate per month, you can start throwing “savings” or “debt payoff” in there, and figuring out how much extra money you have to put away for future you. Budgeting is a skill everyone needs

Do you have a budget or budgeting tips you can share? Leave them in the comments section down below! Anything is helpful, especially when you’re just starting out and aren’t certain if you’re doing anything right.

And please let me know if you like these types of posts or if you’d like to see more like these in the future. I love talking about and reading about personal finance, and I’d love to share that with you!

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