Alright, so you’ve done all your homework, read all the blogs, tracked all of your expenses, and now you’re ready to make a budget!
So. Where do you start?
If you have a regular paycheck, all you have to do in plug in your monthly income and assign a certain amount of money to each of your expenses until there is no more income. Easy.
But if you don’t have a regular paycheck, this becomes a little harder. During my first year of financial independence, I worked as a temp. I was a good temp and had a bunch of clients who regularly asked for me, but I only got work when someone was sick or on vacation. Some weeks I made hundreds of dollars, other weeks I would make less than $50. I very quickly learned that I would have to build my budget in such a way that balanced everything out. After a year or two of struggling to find the right way to do this. I’ve come up with a system that has been working so far.
Put all of your income somewhere else and pay yourself a salary based on the total expenses in your budget. Rags to Reasonable recommends having a whole other chequing account for all of your work expenses, but I just use a savings account, since I don’t really have a ton of work expenses.
Figure out your Base Number
This is the absolute minimum amount of money that you need to survive. It includes your housing expenses and any necessary living expenses (food, medication, personal care, insurance) and anything else that you can’t avoid like fees or debt payments. When money is especially tight, this is the only amount that you’re going to spend this month.
Add Fun Things
Now that you’ve budgeted for the necessities, add in the things that you like to treat yourself with every now and then. Clothing, Eating Out, Coffee and Snacks, Movie Tickets, whatever you want. To figure out how much you should be spending on this stuff, look at the money that you’ve been spending on it when you were tracking it and decide if that is a reasonable monthly amount. Be realistic though, if you see 10 movies a month don’t limit yourself to two, try starting with five or six and see if that is enough to make you happy. During Months when things are a little more comfortable financially, you can make these a part of your budget.
Give Yourself Room to Splurge, but Only with Money You Actually Have
Every now and again, you might find yourself wanting to buy something on impulse. This is ok, as long as you factor it in to your budget. This doesn’t mean that you can’t buy it if it costs more than your budget category, but that means that you’ll have to take the money from somewhere else.
Don’t Forget Your Savings
Make sure that you include savings and debt repayment in your budget. This should be part of your base number. Because no matter how tight things are, you should still save for emergencies and pay off any debt that you have
Record and Re-evaluate
Put everything into the budget manager of your choice. This can be Mint (I’m not a fan, but if it works for you, go for it), You Need a Budget (something that I tried but didn’t quite get the hang of), or a good old-fashioned spreadsheet. You can make your own, use one of the ones I mentioned here, or use the wonderful Starving Soubrette Budget Template! This template is adapted from Gail Vaz-Oxlade’s Student Cashflow Worksheet, but reworked to fit a non-student lifestyle. My favourite part of this worksheet is that it gives you a space to plan out your budget and keep track of how much you actually spend. This is important because you should be re-evaluating your budget all the time to figure out what works and what doesn’t. A budget isn’t a static thing. Plus, my spreadsheet has three separate pages for the next three years so you can work to your heart’s delight.
Download it Here!
Starving Soubrette’s Budget Template
The next few Starting From Scratch Posts will be a little more non-linear. I’m going to do one on using excel and focus on some of the finer points of budgeting and saving money, as well as using credit and investing. Do you have a burning Personal Finance Question? Let me know in the comments and I will be sure to include a post about it!
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