The clever girl’s finance guide: Budgeting made easy
I’m surprised at the number of young girls and brilliant women that don’t know how to budget.
It’s okay, don’t feel bad. Up until a couple of years ago, believe it or not, I was terrible with my finances. Working in finance does NOT guarantee you’ll know how to handle your own money; it’s somehow easier to manage other people’s finances. However, with time, dedication, and many mistakes, I finally learnt how to handle myself, control my spending urges, and budget like a pro, and I’d love to share that newfound knowledge with you.
Step 1: Set realistic goals
Having a goal for your money will help you make smart spending choices. What would you like to be able to do with your money in one year, 5 years, 20 years? Decide what’s important to you and start there.
Step 2: Identify all of your income and all of your expenses
On a spreadsheet or piece of paper, figure out how much money you make from your job, side hustle, etc. Then list out all of your monthly expenses. You’ll be amazed at how many things we forget we spend on each month.
Step 3: Use the 50/30/20 budget
What’s the 50/30/20 budget?
This rule simply categorizes expenses into 3 easy groups:
- Savings/Debt repayment
What are needs?
These are the expenses you can’t live without; they keep you safe, warm and alive. These should account for 50% of your spending.
Examples of needs:
- Mortgage or rent
- Health and auto insurance
- Car payments and gasoline
Savings and debt repayment:
Savings and debt repayment:
- Emergency fund
- Other investments
- Credit card payments
What about wants?
These expenses can be anything you want them to be — items not included in your needs or savings/debt repayment. This should account for 30% of your spending, or whatever is left over if you’re left with less than 30%!
Examples of wants:
- Dining out
- Jewelry and clothes
- Movies and concerts
- Gym membership
Step 4: Balance your budget
Now take your total monthly income and make sure it equals your needs, wants and savings.
Your monthly income = 50% needs + 20% savings + 30% wants
Make the equation work for you every single month!
Step 5: Turn budgeting into a habit
Do your budgeting the moment you receive your income. That’s what I do every 1st of the month! Decide ahead of time what you’ll use each pay check for. Ask yourself: Have I allocated money for my necessities (housing, food, utilities, transportation, etc.)? Have I put money aside for my debt payments, unexpected expenses, savings and the fun stuff? This will protect you from going into debt further because you won’t rely on credit to pay for your living expenses.
Step 6: Give yourself some time
Getting on track with a budget can take a month or two. You’ve lived all this time without a budget, so give yourself time to adjust. Don’t be too hard on yourself and pat yourself on the back for the baby steps you’re making!