How to Budget

Updated on September 19, 2018
SaMya Clark profile image

I am currently a college student living on my own, and I try to keep track of every cent I spend to be able to afford what I want and need.

How to Budget

  1. Make a list of ALL of your expenses (week or month depending on pay cycle)
  2. Organize them into categories (i.e. savings, entertainment, food)
  3. Add up the average money spent over a period of time for all expenses
  4. Add up the average money earned over the same period of time (for consistency)
  5. Subtract the average money spent from the average money earned
  6. If the amount is negative, it's time to make some budget cuts (deficits are not the goal). If the amount is positive, try to find some leeway to start saving money (savings can be life-saving)

A budget example

This is a budget example written by me
This is a budget example written by me | Source

Budgeting Dos and Don'ts

1. Don't exclude extra spending outside of the budget (the point is to track ALL of your expenditures)

2. Do start budgeting as soon as possible (the longer you wait, the less likely you will be to follow one)

3. Don't budget without having room for reward (i.e. shopping, saving)

4. Do experiment. The first budget won't always be the best budget

Breaking down the budgeting process (step-by-step)

1. Make a list of all of your expenses: Start out with your regular bills (i.e. phone bill, cable, insurance) and move on to other expenditures, using the amount you spend on average

2. Organize them into categories: Grouping your expenses makes them easier to keep track of. Any food purchases including eating out and grocery shopping can be put under food. Any regularly paid expenses can go under bills. Anything involving leisure can be put under entertainment.

3. Add up the average money spent over a period of time for all expenses: Adding all of your expenses together from all categories will give you the amount of money that you put towards expenses for the desired period of time.

4. Add up the average money earned over the same period of time (for consistency): To determine the amount of money earned, add up past income earned over the same amount of time money is spent. This is how much money you have to go towards expenses.

5. Subtract the average money spent from the average money earned

6.If the amount is negative, it's time to make some budget cuts (deficits are not the goal). If the amount is positive, try to find some leeway to start saving money (savings can be life-saving): The goal of budgeting is to make sure that you are spending within your means. If you are spending more money than you are making, then you need to cut some things out of your budget. Constant overspending will lead to having no money at all, which is the opposite of what you want. If you are spending less than you make, then you are in a good place. With budgeting, you want to make sure you have room for reward like splurging on a really nice pair of shoes or increasing your savings, which increases financial stability.

Chill budgeting

Being new to budgeting does not mean that it is impossible. Arrange your budget in a way that is easy and user-friendly to you in every way. Instead of letting your money control you, control your money. Knowing exactly how much you spend in certain areas on a regular basis can help your finances in the long run and make you more cognizant of the decision-making process that is spending money.

An example of budget organization

(click column header to sort results)
Food  
Entertainment  
Other  
Groceries: $40.00
Netflix: $10.00
Car note: $150.00
Eating out: $20.00
Movie theatre: $10.00
Phone bill: $50.00
Total: $60.00
Total: $20.00
Total: $200.00
Separating your budget into categories makes it easier to track your spending. Adding the totals from each category will give you your amount spent for the period of time that you decide to budget over (i.e. monthly, weekly, bi-weekly).

You've got this!

Hopefully this helps you on your financial journey. Best of luck!
Hopefully this helps you on your financial journey. Best of luck! | Source

Budgeting Quiz

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This video may help make budgeting a bit easier

This article is accurate and true to the best of the author’s knowledge. Content is for informational or entertainment purposes only and does not substitute for personal counsel or professional advice in business, financial, legal, or technical matters.

Questions & Answers

    © 2018 Sa'Mya Clark

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