• patrickcarpenter199

Budgeting Basics

Hey everyone! Here is the first post in my series about personal money management. In this one, I am going to talk about budgeting and some of the different tactics you can use to stay Savvy with your paycheck.

First thing is first; before you allocate your funds every week, you need to know your cost of living. To do this, make a budget. You can keep it simple by just writing it on a piece of paper and keeping it somewhere at your desk, or you can do what I do and make an excel spreadsheet. There are also a lot of apps out there for those of you who like to do everything on your smartphones. A couple good apps are Mint by Intuit and Capital One budget tracker.

For actually making the budget, you want to have one column for expenses and one for income. I recommend also that on the expenses side, you separate "fixed" expenses, or, ones that are the same every month, from "variable" expenses, which can change from month to month. I list all my fixed expenses first, then I leave a space, then list my variable expenses. It is important to track your variable expenses and record a realistic average amount for your budget. So, if you spend $200 one month on groceries and $300 the next month, you would set your grocery budget at $250. now, this number will change a lot in the beginning for all your variable expenses, but after six months or so of tracking them, you will find the number is much more accurate.

***When calculating variable expenses OR variable income, I always recommend being conservative by overestimating expenses and underestimating income. This way, you always air on the side of caution.

Now, once you have a budget, you have to decide how to allocate funds. Different financial gurus will tell you various percentages of your income that ought to be reserved for certain things, but I personally din't think it needs to be that specific. Keep it simple and follow this basic principle:

Pay yourself first: This means 401k (or other retirement) and savings accounts

Pay your bills second: Fixed before variable, in case you need to adjust

Invest Third: Use this money to build equity either with a side hustle, investment, or business.

The rest is yours to have fun!

****this system works best when you automate it. Set up your bank accounts and your direct deposit for your paycheck so that every payday, certain pre-budgeted amounts go to 401k and savings. Then, have your bills on autopay so you are never late.

Here are two more tips that will help you stay in control of your budget:

- Keep a buffer in your checking account so that auto-pays never overdraft you. For me, this is $2,000, but do whatever you reasonably can. This "buffer" is like $0. You never dip below the buffer. Pretend that money is not there.

- Finally, I recommend having a separate checking account for play money (or use cash) to keep from eating into your buffer or savings. Personally, I budget my spending money based on what I have left after expenses and I set that amount to automatically transfer from my bills account to my spending account and I have a separate debit card that is just for my fun money.

That's about it for the basics! Leave me a comment if you have a question or if you want me to do a certain topic next time.

See you later!


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