5 answers
taylor
Student
Lafayette, Indiana
1
Question
Asked
548 views
How to make a budget
I don't know how to make a budget.
Login to comment
5 answers
Meghavi Talati
Consultant
2
Answers
New York, New York
Updated
Meghavi’s Answer
Hi Taylor,
Some advice I got early on that was helpful was thinking about your budget as "inflows" vs. "outflows". I would first think about what your financial goals are. For example, are you saving up for something? How much are you expecting to save?
Once you have your goal in mind, I would try to set up your expected "inflows" or what you expect to earn. Below that, I would think about your "outflows" or what you will likely be spending on common categories on food, entertainment, transportation, housing, etc.
Based on your goal, you can toggle your "outflows" based on your inflows and your overarching financial goals. Hope this helps!
Some advice I got early on that was helpful was thinking about your budget as "inflows" vs. "outflows". I would first think about what your financial goals are. For example, are you saving up for something? How much are you expecting to save?
Once you have your goal in mind, I would try to set up your expected "inflows" or what you expect to earn. Below that, I would think about your "outflows" or what you will likely be spending on common categories on food, entertainment, transportation, housing, etc.
Based on your goal, you can toggle your "outflows" based on your inflows and your overarching financial goals. Hope this helps!
Kristina Smith
Administration
2
Answers
Land O' Lakes, Florida
Updated
Kristina’s Answer
Creating a budget is an effective strategy to manage your finances. Consider using a complimentary app such as Every Dollar if it's available to you; otherwise, jotting it down on paper works just as well. Begin by evaluating your previous month's expenses and income. A common misstep many individuals make is spending more than they earn, leading to debt that can be challenging to overcome. It's crucial to assess your income, then determine your necessary living costs, such as food, fuel, rent, and so on. Next, consider any existing debt, the amount you wish to save each month, and finally, any additional items you desire but don't necessarily need. If you're seeking a structured approach, Dave Ramsey offers an excellent plan that outlines seven steps towards financial freedom.
Sean Browne
Web Marketing Manager
6
Answers
Salinas, California
Updated
Sean’s Answer
If you can use or learn Quicken that would be a great way to make a budget. But you can just do it on paper as well. Start with a month, what are all the expenses you are aware of regularly recurring? Put them down. What is your income, pay check twice a week. You can start to see each month where all your money is going. Then identify how much you can spend on each category after your expenses. Having a budget is a great first step to having some discipline and saving for the future. Put whatever you can into an IRA ( Individual Retirement Account) now. You will be glad you did!
Misha D'Andrea
Learning + Development
37
Answers
New York, NY
Updated
Misha’s Answer
Hi Taylor!
Great questioning - being in control of your financial freedom is such an important milestone and budgets can help you achieve that. In simple terms, a budget is how you track your money, both income and expenses. You can even use budgeting to predict future money flow to best plan your spending. A great starter budget practice is using the 50/30/20 budgeting philosophy with your after-tax monthly income:
- 50% on necessities
- 30% on wants
- 20% on savings and paying off debt
Break your expenses and income into categories to help track your money flow if you are unsure of where your money currently goes each month. Circle back to your long term goals, commitments, and upcoming purchases to start establishing a budget plan.
Identify what your long term goals are for your money
Identify your known commitments (what is a recurring expense or source of income for you?)
Identify any known large purchases upcoming that will need to be planned around
Start tracking! In one place, start to identify the ins and outs of your monthly cash flow.
Great questioning - being in control of your financial freedom is such an important milestone and budgets can help you achieve that. In simple terms, a budget is how you track your money, both income and expenses. You can even use budgeting to predict future money flow to best plan your spending. A great starter budget practice is using the 50/30/20 budgeting philosophy with your after-tax monthly income:
- 50% on necessities
- 30% on wants
- 20% on savings and paying off debt
Break your expenses and income into categories to help track your money flow if you are unsure of where your money currently goes each month. Circle back to your long term goals, commitments, and upcoming purchases to start establishing a budget plan.
Misha recommends the following next steps:
Kim Igleheart
Career Counselor | Police Officer
1738
Answers
San Antonio, Texas
Updated
Kim’s Answer
Taylor,
If just starting out, it can be difficult to predict future expenses. When I first quit working, and before my disability pay was approved, money was very tight. I made a spreadsheet to track my expenses. Whenever I came home, I went straight to the computer. It was very specific: groceries/household items/personal items/eating out/gifts/tips/shipping and handling/tax/fuel&veh mtc/car repairs/ pet/medical etc. I even had a column for "munchies" which was that candybar at the checkout stand! It easily let me see where my money was going, what was essential, what wasn't. And, I found it was best to sort of budget on a 3 month basis, because there were some irregular expenses, like clothing and haircuts. And I color-coded the columns for essentials vs. non-essentials. This allows me to see, at a glance, where I can cut back if I need to, or what is getting out of control. This was five years ago. I'm now in a better position, but, still use this tracker!
Mind you, this was just expenses other than bills, because my bills are pretty much the same month to month. I use credit like cash, and pay it off monthly.
Anyway, you need to know where your money is going, and, how much you are bringing in. If you are in a situation where you can start putting some aside for savings, you need to. If you are not, you still need to, even if it is just $20. You want to get yourself in the habit of "paying yourself first." If you live on your own, check with your gas and electric companies to see if they have a "budget payment plan." that is where they figure your monthly average and bill the same amount every month. It helps!
When you figure out your bills are say $800, your other expenses are $500, and your take home pay is $1600, that leaves you $300 wiggle room. But, you need to start planning for "unexpected" expenses. They really are "expected." You will need to see a dentist or optometrist at some point, your car will break down, etc. So you start saving to create an emergency fund - so you can borrow from yourself rather than put it on a card. You should strive to have cash reserves of 3-6 months of expenses. In this case, $3900 - $7800. It's doable, over time. And if you need to tap it, you repay it.
If your earnings vary, it is more difficult. Save extra during the good months to see you through the bad months.
I don't look at it as strictly "a budget," it's more about managing your cash flow. Knowing your income and expenses, and living within your means.
It's great you are trying to get a handle on this at a young age!
Kim
If just starting out, it can be difficult to predict future expenses. When I first quit working, and before my disability pay was approved, money was very tight. I made a spreadsheet to track my expenses. Whenever I came home, I went straight to the computer. It was very specific: groceries/household items/personal items/eating out/gifts/tips/shipping and handling/tax/fuel&veh mtc/car repairs/ pet/medical etc. I even had a column for "munchies" which was that candybar at the checkout stand! It easily let me see where my money was going, what was essential, what wasn't. And, I found it was best to sort of budget on a 3 month basis, because there were some irregular expenses, like clothing and haircuts. And I color-coded the columns for essentials vs. non-essentials. This allows me to see, at a glance, where I can cut back if I need to, or what is getting out of control. This was five years ago. I'm now in a better position, but, still use this tracker!
Mind you, this was just expenses other than bills, because my bills are pretty much the same month to month. I use credit like cash, and pay it off monthly.
Anyway, you need to know where your money is going, and, how much you are bringing in. If you are in a situation where you can start putting some aside for savings, you need to. If you are not, you still need to, even if it is just $20. You want to get yourself in the habit of "paying yourself first." If you live on your own, check with your gas and electric companies to see if they have a "budget payment plan." that is where they figure your monthly average and bill the same amount every month. It helps!
When you figure out your bills are say $800, your other expenses are $500, and your take home pay is $1600, that leaves you $300 wiggle room. But, you need to start planning for "unexpected" expenses. They really are "expected." You will need to see a dentist or optometrist at some point, your car will break down, etc. So you start saving to create an emergency fund - so you can borrow from yourself rather than put it on a card. You should strive to have cash reserves of 3-6 months of expenses. In this case, $3900 - $7800. It's doable, over time. And if you need to tap it, you repay it.
If your earnings vary, it is more difficult. Save extra during the good months to see you through the bad months.
I don't look at it as strictly "a budget," it's more about managing your cash flow. Knowing your income and expenses, and living within your means.
It's great you are trying to get a handle on this at a young age!
Kim