Budgeting for Beginners with 5 Easy Steps
Okay friends, I think this has been my most requested topic since I have started my blog, and I’ve finally decided to really dig into it. The topic is finances! If you’re like me, you hear that word and get excited, but I’m guessing the majority of you hear that word and instantly feel a little bit of anxiety or worry. Don’t worry, because I would say that’s pretty normal. What I think is a little more uncommon is feeling confident or secure in your finances. My goal is to begin the conversation about how to shift your mindset towards confidence in your money and the way in which you handle it.
I just want to put it out there that I am in no way an expert on this topic. I would actually argue that I’m more of a beginner than anything else, but I think and hope that the information I do have will bring value to you!
I had originally wanted to do a finance series, BUT I’ve found myself putting off this post until I have more written and I have had several people ask me to post about it so future posts about finances will come, just not in a series fashion.
I thought the best place to start was truly from the very beginning, back before you even have a budget to begin with! Contrary to popular opinion or belief, everyone can and should have a budget. And trust me, I know the excuse of, “well I don’t make enough money to budget,” or, “I’m in college right now and am just living off of loans,” and I know them because that was ME. I was in that exact same mindset not that long ago.
Budgeting felt like this daunting chore that would just show me how broke I was and make me feel even less like I could survive my college years. So. I don’t pass judgment on you if you’re sitting there thinking, “yikes that’s me!” I know it’s you and it’s okay! We are in this together and if I had someone teaching me the easiest way to handle my money you had better believe I would have been all over it!
So let’s jump right on in! Again, this is for if you don’t have a budget at all, but I promise I will get more in depth in later posts.
Step One: Estimate what your income for the month is going to be.
Yep. That’s it. Whether you are getting paychecks, dividing up student loans to live off of, getting checks for disability or unemployment, allowance money, you’ve got some sort of income. It doesn’t matter how big or small, you’ve got to figure it out.
And for those of you that are a perfectionist like me, that’s why I used the word estimate. Coming from someone who babysat and nannied her way through college, I had no idea how much I would make a month. It varied so much and felt overwhelming to think about.
If that’s you, it’s okay! Estimate ANYWAY. If that makes you nervous then don’t be optimistic haha! I know that sounds terrible but the more cautious you are on estimating your income, the less likely you will be to overspend.
Step Two: Figure out your NONNEGOTIABLE expenses.
These are going to be things like your bills. I’ll list a few examples of things that might be in your lifestyle:
- Car Insurance
- Mortgage or rent
- Day care or Nanny
- Phone Bill
- Student Loan Payments
I know there are many more but these should be a good start and jog your memory if you’re struggling to think of everything.
Step Three: Decide your budget for each category
This is where it can get a little overwhelming, especially if money is tight, but that’s why you create the list above. There are some categories that will always be the same amount for the most part and you absolutely have to make those payments so start with the ones that you don’t need to make a decision about.
Then move onto categories that are different each month. An example for us is gas. During the winter we use way more because we drive up at least once a week to the mountain to snowboard, so we increase the budgeted amount during the season. Another example is your electric or gas bill. These tend to be higher in the winter than in the summer so we sometimes have to guess what each month will be approximately.
Step Four: Determine what to do with the income left over
This is the part when you have to prioritize your wants. It’s about figuring out what to say no to, so that you can say yes to big things or goals in the future.
This is the step I struggle with the most but that I think is the most exciting. I have so many things I think I “need” that when money is tight, deciding what to give up is really hard. Having those dreams and desires to look toward really help me to give up small things now. When Alex and I first started budgeting a little over 2.5 years ago there were months when there really wasn’t much left over after we had worked through all of our nonnegotiable expenses. So we had to decide, what are we going to say no to this month so we can say YES to other things in the futre?
This is going to look different for everyone, but these are a few examples of what Alex and I use it for:
- Student Loans (on top of our monthly payments)
- A spending allowance for each of us
Not every single one of these things happen each month, especially if it is a bit tighter or if we are saving for something big.
If I’m being honest, during 2018 the extra student loan payment was the thing we decided to not be as diligent about and we absolutely felt it. We said “yes” to a lot more things but our payment didn’t go down as much as we would have liked.
The first year we got married, every extra cent went into student loans. We didn’t have allowances for spending, our coffee budget was $20 (it’s now $40), and we didn’t travel hardly at all. It felt like we were saying no to everything, And then we managed to pay off $30,000 in student loans and that made the saying no feel WAY BETTER.
Every. Cent. Counts. So if you have debt or big financial goals, or a huge trip coming up, be willing to trim out the extra fluff, and take that extra money and put it towards those big goals or payments. You’ll be amazed at how much you actually end up having and how REWARDING it feels when you accomplish it
Step Five: Be Diligent, Don’t Give Up, and Just START
The last and HARDEST step. Yes each step is hard, but this is the hardest. You have to actually commit to starting. You won’t ever be able to train unless you show up for practice. You have to be willing to put in the hard work. The months and years of hard work. Budgeting is like running a marathon friends. It’s frustrating, discouraging, and you’re going to fail.
And now you’re thinking, “gosh Madelyn after all those tips you’re saying I’m going to fail? Thanks for the motivational speech.” Haha But that’s when I say. AT FIRST. All of those things are true AT FIRST, but the more you stick to it and work hard at it, the easier it will become. Are there still going to be months where you epically fail? Absolutely. But do you need to see each month as a fresh start? 100%. When you first start, it’s going to take several months before you feel like you really have your groove, and then you’ll be thrown a curveball and have to readjust and learn how to recover, but you keep going.
Be diligent. Track every single expense. Yes. EVERY. SINGLE. ONE. Stick to your budget. Don’t get lazy half way through the month. Write your goals on the mirror in your bathroom, hang it on your fridge, do whatever you have to do to remind yourself why you started in the first place. Each month that you do this you will be one step closer to having control over your money instead of your money controlling you.