Before You Start
Budgeting is an essential skill if you plan to make it on your own for the first time. There are some things you need to think about before you start putting pen to paper:
1. Are you going to live by yourself or share a place with roommates?
Living with roommates is cheaper, and many expenses can be split between yourselves. If you get along, living with roommates can be an awesome experience, and you can make lifelong friends. However, if you get stuck with a roommate you just can't get along with, your life could be made quite difficult. Just make sure you get to know roommates before you decide to rent with them.
2. How much money do you earn weekly and monthly?
Tally up all your income sources and decide if you actually have enough money to move out. The initial move will take some savings, as will furnishing your new place, and it's also important to have enough to cover ongoing expenses such as rent, utilities, insurance and groceries.
3. Have a look at rental properties on the market.
Browse some real estate sites for rental properties in the area you're looking at. This should give you an idea of what sort of price you should expect to pay each week in rent.
A Sample Budget Spreadsheet
Making Your Budget
There are many sites, such as Mint, which track your budget automatically, but I find the best way to plan out a budget is using spreadsheet software such as Excel.
First, you need to make a list of essential expenses which will include rent, utilities, insurance, groceries, mobile phone credit, internet and transport. You may not have any expenses in some of these areas but just add and subtract them as you need.
When I set up a budget spreadsheet, I write these categories in their own row down the left-hand side of the spreadsheet. If you are sharing with roommates, group them into two groups: shared expenses such as rent and personal expenses such as transport.
Then in the next column across, you want to write the weekly expenses for each category.
- Some you should already know like how much your mobile phone costs, and how much transport costs.
- You will also know how much rent costs from researching how much houses and apartments in your desired area cost.
- Budget $200 a month for utilities.
- Research insurance policies and find out how much renter's insurance will cost (and yes, you need this, it's worth paying $150 a year in case someone steals or your stuff or the house.
- Research internet providers and see which one offers the best deal for your needs and write their fee down.
- Groceries prices vary depending on where you live and how much you eat, so budget anywhere from $50–150 a week.
You may need to convert from one time period to another (e.g., monthly to weekly):
- Annual to weekly: divide by 52
- Monthly to weekly: divide by 4.33
After you've got all your numbers input, add another row called total and add up all the numbers or use the SUM function. Divide any shared expenses between the number of people contributing and add this to your personal expenses total and voila. This is how much you need to be earning a week. This value is a rough estimation, and it does help if you are earning a little bit more so you have an emergency fund in case of (you guessed it) emergencies.
How to Create a Budget on a Spreadsheet
Saving Money to Move Out
Another thing you have to factor in is that it costs money to move out, and these costs add up very quickly. You may need to pay for furnishing your new place, kitchen equipment and other expenses.
Factor in saving up for the following things:
- Furniture, furnishings and kitchen equipment ($1000–$3500): Get stuff secondhand or look on sites such as eBay, Craigslist or the local classified ads for cheap or sometimes free furniture.
- Rental bond/deposit: This is usually four weeks' rent which will be refunded when you move out if you haven't damaged anything.
- Four weeks' rent (again): Many landlords like the first four weeks' rent in advance, so budget for this as well.
- Any set-up costs ($500): Some utility companies may charge a fee to connect you; the same goes for internet companies.
- Extra cushion ($500–$1000): You'll need this to cover any unexpected fees.
- Moving costs: Are you going to hire movers, or can you get your friends and family to come and give you a hand?
This can add up to anywhere from $3000+, depending on where you're renting and how much you're willing to pay for furniture and furnishings.
Now you've got a number you can make a plan to save that money:
- Look at how much many you already have in saving and subtract it from the amount you need to save (e.g., If you have $1000 in savings and have calculated $4000 in moving costs, you only need to save $3000).
- Set a realistic date that you want to move in by, and divide the remaining amount by how many weeks or months away that is (e.g., If you want to move in six months, you'll need to save $3000 divided by six which is $500 a month or about $115 a week).
- Start putting this much money per week into your savings account, and by the end of six months, you'll be ready to move into your own place!
Sticking to the Budget
So you've moved out, and you're enjoying the independence. What do you do next? Try as hard as you can to stick to the budget and track your spending. You can do this in a spreadsheet as well.
Write down how much you spend on groceries, how much your first utility bill is and every other expense. Then, after the first week and month, look at how what you budgeted compares to what you spent. Did you spend way too much on food, and was your electricity bill way more than you expected? Or did you come in under budget on water?
If you spent more than you budgeted for, ask yourself: Is the amount I set reasonable, or should I raise it, and how can I lower this next week and month? For example, if your electricity bill is too high, are there ways you can cut back on usage? Can you run the AC less or unplug appliances when you're not using them?
After a few months, you should have a budget that works well for you.
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.
David Johnson from Denver, CO on April 25, 2018:
Wow this would have helped save me A LOT of overdraft fees and headaches back in the day. Great hub!