Let’s talk about money! The average American has over $6,000 of credit card debt, and money issues are one of the leading causes of divorce. Some people hate talking about money, some people love it, but either way, it’s important to understand your finances.
While I am the daughter of two accountants, I myself am neither an accountant nor a financial advisor. I’m just a 24-year-old Zillennial (read about it) trying to figure out how to do all the adult things. These are just my opinions, and I am sharing tips that work best for me. Consult a licensed professional for personalized reliable advice.
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MONEY IS A MINDSET
When people think of budgeting, they see it as something limiting the amount they spend. They think making a budget is going to mean they can’t buy the new sneakers they want or they can’t get their daily morning Starbucks, but that’s not necessarily the case. I think it’s really all about your money mindset. To me, money is freedom. It’s not evil, it’s not happiness, it’s just some flimsy pieces of green paper and numbers in my online banking accounts that allow me to eat the things I want and travel to the places I’ve always wanted to go. If you want to learn more about how to change your perspective about money, I’d recommend reading You Are a Badass at Making Money by Jen Sincero.
I’m interested in learning about how people spend their money with different salaries and in different parts of the country. I like to read Refinery29’s Money Diaries series, which are anonymous accounts of weekly spending and remind me that spending decisions are very personal, and everyone’s situation is unique.
LET’S MAKE A MONTHLY BUDGET
I recently got a promotion at work, so I had to re-do my budget. I am currently living at home for the pandemic, but I plan to return to Los Angeles next year and am budgeting for my housing expenses.
If this is your first time seriously creating a budget, set aside a few hours because it can get time-consuming trying to figure out all your expenses (looking up your car insurance bill, averaging your utilities, etc.). Once you create your budget, it shouldn’t take too long to adjust it in the future.
Everyone’s financial situation is so different, so no single budgeting plan will fit everyone. I’ve created a template that’s been working for me, and I’ve simplified it to make it applicable to more people. The template doesn’t use my actual income and expenses, but hopefully this gives you a good base template.
Click to download my Google Docs budgeting template.
click on the File tab, then click Download
PART 1: FIGURE OUT INCOME AND EXPENSES
To figure out how much you get to spend, I need to figure out how much money I’m making. I look at my paystub and note all the taxes and other deductions and see how much I’m taking home. I also have another small income stream through my photography business and make sure to allot some money for taxes.
To allocate my money, I aim to follow the 50-30-20 rule. Of my after-tax income:
- I try to spend 50% on things I need (rent, insurance, etc.)
- I try to spend 30% should be spent on things I want (going out to eat, books, etc.)
- I try to put 20% into savings and count my 401(k) and HSA contributions that are automatically deducted from my paycheck.
LIST OUT NEEDS/FIXED COSTS
These are the things I need to live my life, like rent, and don’t typically change month to month. A budget is most helpful if it’s actually accurate, so try not to guess at these costs. You can look at your previous credit card statements, insurance policies, and Venmo accounts to get your actual dollars. A sample list of expenses could be:
- Housing: rent, utilities, renters insurance
- Auto: car insurance, car payment, gas, parking
- Medical: necessary medication, health insurance (if it’s not already deducted from your paycheck)
- Debt: credit card payment, student loans
- Pets: food, supplies, medical, insurance, grooming
- Cell Phone Bill
LIST OUT YOUR WANTS/VARIABLE COSTS
These are the things I spend money on that I don’t actually need, and are costs that could change from month to month. I include groceries and restaurants in this because while I do need to eat to live, the amount varies in these categories a lot.
I create categories for all the things I can think of that I normally spend money on, and then I create a “Miscellaneous” category for anything else. The idea is to account for every dollar. Some categories can include:
- Food: groceries, coffee, restaurants, bars
- Business Expenses: Canva Pro, Photoshop, social media ads, website hosting and domain, office supplies, products, packaging (also good to keep track of these because they can be tax deductions)
- Wellness: Gym membership, fitness equipment, skincare, makeup, vitamins, therapy, manicure
- Home: kitchen, bath, bedroom
- Entertainment: music streaming subscriptions, video streaming subscriptions, books, event tickets, gaming
- Gifts
- Shopping: clothes, shoes, accessories, jewelry
- Subscriptions: Headspace, Book of the Month, Winc Wine, FabFitFun, Blue Apron, Stitch Fix
- Travel: plane tickets, Uber/Lyft, hotels, Airbnb
- Charity/donations
- Annual Fees: credit card annual fee, Costco membership, Amazon Prime, cybersecurity protection,
- ATM cash withdrawal
- Miscellaneous
Example budget using my spreadsheet
These are just to help you think of all your expenses. You can choose how specific or general (coffee category vs. overall food category) your categories are, or combine categories as you see fit.
What I learned from analyzing my monthly expenses is that there’s no “normal month.” One month, I travel and have to pay for an Airbnb, the next month I get new running shoes, another month I buy concert tickets.
Because there are always unexpected expenses, I try to calculate an average monthly budget for different categories. So maybe I allot $50 for events and I spend $0 in January, but I drop $200 on concert tickets in February. Then I go to a baseball game in June, a career workshop in September, and then a museum exhibit in November. While I don’t always spend that $50 each month, over the course of a year, it averages out to be about $50 a month.
As I mentioned before, it’s best to create realistic budgets. I’ve based all my monthly budget allocations on my real spending trends. If you bank with a national bank, many have online budgeting tools within them and will do their best to auto-categorize your spending for you. I have two credit cards, so I looked at spending summaries from both cards to get the full picture. It took me an entire day looking through all my 2019 credit/debit card statements and Venmo transactions to create my budget, but you can just look at a few months of spending to get your averages.
PART 2: ADD BUDGET CATEGORIES INTO MINT
If you Google “best budgeting apps,” Mint will be on the list, and for good reason. It’s great because it is completely free and it’s secure, as it’s made by Intuit, the financial software company that owns Turbo Tax, QuickBooks, Credit Karma, and Mailchimp. I think you could just set up a budget with your bank, but their mobile apps are a little clunky. I’m not an affiliate or sponsored by Mint, I have been using it since college. It’s so nice to have a program that basically automatically tracks your expenses by category and I can always open the app when I’m on the go.
There’s a website version and a mobile app. To create your monthly budget, I think it’s easiest to use the website and then when everything’s set up, download the mobile app and you can make edits to your budget from there.
HOW TO CREATE A MONTHLY BUDGET IN MINT
- Go to mint.intuit.com and sign up for an account
- Connect all your bank accounts. If you want a complete picture of your finances, you can also link Venmo, loans, and investment accounts
- Go to the Budgets tab and click Create a Budget
- Use the categories from your Excel. Choose a pre-defined category or add a new custom category
- Choose how often this category should be tracked: every month, every few months, or once.
- Check the box if you want to start each new month with the previous month’s leftover amount. Example: If your monthly budget for events is $50 and you spend $200 on concert tickets in February, you’ll start March by being over budget by $150 instead of re-starting at $50. If you only spent $20 on concert tickets in February, you’ll start March under budget by $30 and technically have $80 to spend on events that month.
- Enter the amount you want to budget
- Click Save
- Repeat for all the categories from your Excel
- Download the mobile app and sign in
Mint will guess and auto-categorize your transactions, but sometimes you’ll have to manually edit the category. For transactions it’s not sure about, Mint will mark it as “Uncategorized,” so be sure to go in and manually categorize it.
On the website version, you can click the trends tab to see your spending trends over time. You can also export your transactions to Excel.
WHEN TO UPDATE YOUR BUDGET
You should adjust your budget if your income changes (promotion, lose your job, get a second job, etc) or your expenses change (move home and don’t have to pay rent, have a child, paying for grad school, etc). If you continually find that you’re over-budget or under-budget in a category, you should adjust your budget allocations.
MY MONTHLY BUDGET BREAKDOWN
I currently have a slightly different pandemic budget, as I am living in my parents’ house and not paying rent, but this is what I’ve budgeted to spend when I’m back in Los Angeles. I’ll have to re-adjust when I actually find an apartment and know my real housing costs.
As you can see, my budget shows what I value. I like to eat out at restaurants and travel, so my restaurants and vacation budget are a significant amount of my monthly spending. I like to go to pop-ups, museums, and events, so I have an events & tickets budget. I love to give gifts, so I have a gift budget allotted for friends, family, and co-workers’ birthdays and holiday shopping. Every month, I donate to a charity/cause of my choice, so I’ve included donations as its own category and have added a couple of dollars to cover service fees.
I hope you found this blog post helpful! If you know someone who could benefit from this information, share this blog post link with them!
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