Budgeting 101
Woo this has been a long time coming! I asked y'all a while ago if you wanted me to tell you how Adam and I budget, and I got an overwhelming YES! I want to preface that everyone's budget is going to look different, so don't compare yourself to your friend or the couple you think has "made it". Some people start out with tons of school, credit card and car debt, etc. We all have a different starting place, so it's unfair to compare yourself to someone else! Just focus on where you are TODAY and what you can do every single day to get to where you want to be.
Before you start a budget, it's important to define goals because the reasons you're budgeting may impact the choices make along the way!
Common reasons to create a budget:
Wanting to save more money
Reduce overspending on problem areas
Ending fights about money with your spouse
Making sure your spending reflects your goals
Breaking the paycheck to paycheck cycle
Avoiding spending money you don't have
Getting out of debt
Staying on track toward long-term financial goals
What to do first?
Do a deep dive into current spending habits. Where do you spend most of your money monthly? Rank them in order of what you spend the most on to what you spend the least on. When do you spend most of your money (weekdays or weekends)? Determining these things will help you figure out the areas you can cut back on and be conscious of throughout future months.
If you're married - figure out your spending habits as a couple. Who is the spender and who is the saver? Money is a top argument for marriages and in order to prevent these you need to make sure you are on the same page and are working as a team! Come up with reasonable goals that you can both live with. For us, I am the "spender" between the two of us but we are both pretty good at saving and are conscious of our financial situations.
Add up all of your monthly expenses: utilities, mortgage/rent, insurance, internet, cable, etc. What do you pay for every single month that is non negotiable? I include gas, and groceries in there and evaluate what we have spent in past months to determine our "budget" for those.
Add up all of your monthly income. If you don't have a set salary or hourly job, try to make your best guess of what you make monthly
Determine your financial goals : Do you want to buy a house, a new car, go on vacations, upgrade apartments, start a new business, etc? These are all types of financial goals and things that you would want to work towards, and are necessary to determine before you start a budget. Someone asked if we had the same financial goals - I think we were both pretty clueless as to what our possibilities of achieving financially were at first, but after sitting down and talking about it multiple times we are both on the same page about where we want to be and how we are going to achieve it.
After you have determined your goals, decide what you need to save to get there! Break it down from yearly to monthly and then work backwards to see where you need to cut back in order to make that happen.
How to pay off debt
The average individual has $38,000 in debt. That is a lot of money! I know it can be overwhelming to look at a large sum and think you are never going to be able to pay that off, but I'm going to give you a trick that my mom learned when she was just out of college that helped her and my dad pay off $40,000 of debt in 4 years!
If you have multiple forms of debt - take the lowest one and pay that off first. If you owe 5K on your car, and you have to pay $250 a month try paying $350 a month. Once that is paid off, take that $350 you were putting towards your car and now put it towards another debt you have. And keep repeating this process until all of your debt is paid off! The key is to put the money you were spending on past debts and combine those to pay the remaining debts. A lot of people once they finish paying one debt off, think they have extra spending money now that they no longer have that expense, when really you should keep living below your means and pay your other debts off quicker!
Saving money is not easy - it's kind of like losing weight. There is sacrifice and some pain in order to get the desired result. No pain, no gain! It's cliche, but true. You don't want to be so strict that you never enjoy the money you earn, so save for splurges and fun things! I'm not a financial expert and I don't know all the answers, but the goal is to live under your income level so that you have the resources to save and also enjoy the money you earn!
Ways I save money
Don't get your nails done every month. This one isn't fun but if you think about how much you pay a month for getting your nails and toes done, it's probably over $100 a month! I try to go every other month when it comes to getting my nails done and only for events. For some, this is a non negotiable and are willing to pay monthly for this, but make sure you are sacrificing somewhere else! Right now I am taking at least 3 months off from getting my nails done to make up for some unexpected financial investments we had to make.
Don't be wasteful at the grocery store. This one is huge y'all! There are so many people that over buy at the grocery store because they are unprepared and end up throwing away a lot of food every week. I always sit down on Sunday's and plan out our meals. I think about days that Adam will be out of town, days we have small group or are going out to eat with people and plan dinners around that. I always make meals for 4 or more servings so that we have leftovers and eat them for lunch and dinner the next day or two. I also plan out snacks I will eat each day, so that I'm not making impulse purchases at the store. You can also put things in the freezer when you don't think you're going to use them before they expire! We have saved plenty of future meals by doing this. I also refrigerate our bread so that it lasts longer. Lol, it's the little things that help.
Don't buy your lunch. I'm not saying never go out to lunch to eat with coworkers or friends during the week, but definitely don't do it every day. I bring my lunch every single day to work and you'd be surprised at how much money I save by doing that! Eating out for lunch is minimum $50 a week for one person and I spend only $80-$100 a week at the grocery store for both Adam and I and that feeds us 3 meals a day for 5 days (we usually eat out some on the weekends)!
I do bi-weekly check-ins. Every other weekend I input things I've bought or spent money on so that I know where we are at for the month. If we have overspent on unusual expenses, then I make sure to have more self control for the remaining two weeks.
Put the money for your taxes away now. I make sure we always have enough money to pay our taxes all year long, so that we aren't under a lot of stress when that time comes around. I made another savings account and let our tax money sit there all year long! If you don't have the money now, make that one of the items you save for. I also put away our home insurance for each year so that we can pay it upfront (we didn't escrow our insurance).
Don't buy Starbucks coffee. Some of you might have rolled your eyes, but you can get an equally satisfying coffee from Dunkin Donuts or from the comfort of your own home! Thankfully, I don't have to have coffee every day to function and it's more of a splurge item for me, but I know that's not always the case for others. Try making your own coffee in the morning or getting a cheaper option! Paying for a $5 coffee every single morning adds up quick.
Save your commission checks, or side hustle money. I never spend my commission checks! I always put them immediately in savings and act like I never even got them. Adam and I try to live under both our salaries combined because if we were to ever not get a commission check or if we were to have an emergency expense we knew we had the money to cover it! Another thing to save is tax refunds! Put that in your savings for next years taxes...
Be conscious of your shopping habits. I try not to pay full price for my clothes. I will wait for a sale or shop at a consignment type of store. I also invest in statement pieces that I will have for years. I buy jeans maybe every 2 or 3 years because I looked at them as an investment. Same goes for coats/jackets, jewelry, swim suits and shoes. I have had a lot of these items for years! Of course, I buy the occasional new sandals or heels for events, or a new trendy piece I've really been wanting, but I really think about the items I do have and if I will wear that item enough to get my money's worth. I have these cheap white booties from target, that I originally saw a similar pair at Nordstrom Rack for $30 more than what I bought them for, and I've had for over 6 months and have worn soooo many times. When they get to a point where I can't wear them anymore or they go out of style (which I hope they never do) I won't have a problem getting rid of them. So really think about your shopping habits and don't be an impulse buyer! Think about your purchases for at least a day before you pull the trigger.
Limit yourself on eating out/drinking. When it comes to going out, limit yourself to going out one day a week or when you go out to eat limit yourself to two drinks. Be realistic with what you are willing to compromise and what you can achieve! If you eat out a lot, try to decrease the amount you eat out a week by one meal. Adam and I try to only eat out for lunch and dinner Saturday and then lunch on Sunday. So that's only 3 meals or so a week that we are eating out! It allows us to still try new restaurants and food without breaking the bank.
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