Budget (n): an estimate of income and expenses for specific periods and categories.
Too many times the meaning of a budget is misconstrued. Most tend to think being on a budget must mean you’re broke, but I promise, the two are not synonymous. You aren’t broke because you have a budget and the math is not difficult as long as the plus and minus function on calculators never disappear. Seriously, basic algebra will get you by. A budget means you’re a responsible adult who cares about their money and where it goes.
It’s simple, estimate your income (how much you make) and estimate your expenses (how much you spend). Prior to 2016 I didn’t have a budget, but if you know, you know, once you’ve semi-mastered the ‘skill’ you’ll begin to wonder how you even lived without a budget in the first place. You’ll start wanting to know how much you actually spent on groceries all your life and how much diapers will cost per month even though you don’t even have kids. That might just be me. It’s impossible to get to all the benefits of budgeting though, if you can’t get past the “having a budget is limiting” mindset.
A budget doesn’t have to be limiting, but it can be if you want it to. That’s the beauty of it – your budget is what you want it to be as long as it is within your means. It’s about knowing what’s in your means because it is extremely easy to spend more than you make when you don’t know where your money is going. It surprises me how many times I listen to people with a six-figure salary living paycheck to paycheck. How does this happen? Because that’s a good chunk of change…
I’ll tell you how, it’s because without a plan, without a concept of giving your hard-earned money a name and spending within your means your money will very, very quickly run away from you.
“A goal without a plan is just a wish.” -Antoine de Saint-Exupéry
If you’ve never done this before you could be wondering, what do I even include in my budget? Well here I am to tell you, you will include everything. It’s seriously not difficult though, and here are some simple and unintimidating categories I use:
Rent/Mortgage: monthly rent total or mortgage for home owners
Auto/Transportation: car payment, gas, parking, bus or train pass, car washes etc.
Groceries: monthly total spent at super or farmer’s markets (it’s probably best this doesn’t include wine, beer or fast food – pro-tip)
Utilities: gas, electric, water, trash, sewer, cell phone, internet etc.
Insurance: renters, home owners, auto, personal property, disability, life etc.
Pets: food, litter, pet rent (if that’s a thing for you), treats, toys, vet visits etc.
Children: diapers, baby food, daycare, toys etc. (I don’t have any, but I didn’t want you to forget them)
Home Supplies: toilet paper, dish soap, garbage bags, detergent etc.
Personal Care: haircut, skin care, threading or waxing, mani/pedi, (you can throw some wine in here)
Non-essential: the “allowance” for anything unbudgeted, your fun money, subscriptions, dining out etc. On our budget, these are things we could do without if necessary because they aren’t necessities.
Anything you have extra, after your income minus above expenses, goes to paying off debt or savings and when drafting your budget, you’ll want to make sure you give that a name as well. Things you don’t label get away from you like that food in the fridge you didn’t want your roommates to kill. You’ll be upset it’s gone, but you could’ve just given it a name #amirite.
Disclaimer: Your first few months won’t be perfect, and you will miss something, maybe many things. You might underestimate or overestimate, but you’ll get better with each month that passes because you will stick with it. You know what I always say, practice makes perfect. I don’t always say that, but it applies.
TL;DR: there’s something you’re missing in life — it’s a budget and you should have one.