If you’re constantly wondering where all your money went, you aren’t alone. But you do need a budget.
If the ‘B’ word makes your stomach hurt, you’re thinking about it wrong. It’s not all penny-pinching, number crunching, and guilt. Budgeting is about making a plan for your money, so you can spend it how you want.
Get started by writing a few things down, like:
Your monthly take-home pay. From regular wages, commissions, dog walking...anything that gets you paid.
The things you can’t live without. That’s stuff like housing, utilities, phone, basic groceries, and transportation.
What you like (but don’t need) to have. The fun stuff: workout classes, fuzzy sweaters, takeout, a wine subscription, etc.
Out-of-the-ordinary expenses you can still plan for. Like car insurance, annual memberships, and birthday gifts for family and friends.
Life goals you’re working toward. Including investing for retirement, paying down debt, and saving for a home, car, wedding, or baby. Plus smaller, more immediate goals, like building an emergency fund, buying a new couch, or going on a safari.
Next, add some price tags next to each item. Some of these, like your rent or phone bill, probably stay the same every month. Estimate the ones that fluctuate or don’t happen every month. Pro tip: look back at your last few credit card and bank statements. And round up to give yourself some breathing room.
Related: How to Budget with Inconsistent Income
Subtract what’s going out out of your bank account from what’s coming in. If you get a positive number, resist the urge to add more budget items. Put that “extra” cash money toward your goals instead.
If you’re in the red, look for places to trim. Maybe that means taking less Ubers, making lunch at home, or getting a library card to give your Amazon cart a break. Maybe all three. Maybe all three plus more serious moves, like cutting cable or getting a roommate.
Choose a budgeting style that works for you. Some popular ones:
All-cash diet. That’s when you withdraw cash to cover variable expenses, like clothes, food, gas, etc. When you’re out of cash, stop spending.
50/20/30 rule. Which organizes your spending by needs (50% of your take-home pay), goals (20%), and wants (30%).
The anti-budget budget. Aka the “pay yourself first” budget. Where you funnel money straight from your paycheck or checking account to your needs (through automatic bill payments) and goals (with transfers to your savings and investment accounts). Then you can spend the rest on whatever you want. Typically works best for rule haters and all-stars that generally have their financial sh*t together.
Related: Quiz: What’s Your Budgeting Style?
If you’re struggling to stay on the wagon, make adjustments. If you think a different system would work better for you, try it out.
Budgets don’t tell you ‘no.’ They say ‘yes, here’s how.’ That can help you develop good habits, reach your goals, and live your best money life.