There are countless of budgeting methods out there.
If you read a few personal finance blogs, you are likely to come across more strategies than you could even imagine.
You’re likely to find the 80/20 budget, the 2-Category budget, the Values-Based budget, the Zero-Sum budget, and tons of other trendy budgets with fancy names.
While some of these do make sense and may work for some people, at the end of the day, you can just do what works for you.
It doesn’t have to have thousands of proponents who swear by it. It doesn’t have to require an hours work each night. It doesn’t have to require spreadsheets on spreadsheets or anything like that.
It just has to be something that you will actually stick to long-term.
In my opinion, the simpler the better.
Below, I will tell you how I personally budget. It doesn’t have a fancy name and is by no means complicated, but it works for me.
The “Joe Budget”
There are a few simple steps to my newly-anointed “Joe Budget”.
1) Write out all of your income: The first step to figuring out your budget it to simply write out all of your income. Check your pay stubs and any other records of consistent income and write it down. Aside from your job, this may include any “side hustles” you do, any passive income (such as rental properties), and any other recurring money you have coming in.
2) Write out all of your mandatory expenses: There are some things that you simply have to pay for each month. The next step is to write all of these out. These include rent/mortgage payments, utilities, car payments, food, gas, insurance, student loans, other kinds of debt, and anything else that would lead you to trouble if you didn’t pay. Subtract these from your income and automatically set aside this money each week of the month before spending it elsewhere.
3) Figure out how much you need to/want to save: The next step is to come up with a weekly or monthly saving goal. Trying to retire by 40? Cool. Figure out what you need to save to get there (be sure to account for interest from investments). Trying to set up an emergency fund? Nice! How much do you have to put away to hit your goal amount in your desired length of time? Subtract your savings goal from your income.
4) Subtract the non-essential money you know you’re going to spend: So you know how much money is coming in, what has to be going out, and how much should be put away for a later date. Now you know how much money you have left over for the fun stuff – you know – eating out, new clothes, going out with friends, even more saving. Be honest with yourself and think about where this money typically goes and if you’re willing to cut back on any of those places. If you know you’re going to happy hour every Thursday with your buddies, then account for that. If you go to dinner with the wifey every Sunday night, account for that. Too many people try to say they’ll cut these things out of their lives to save money, then end up never doing it.
5) Decide what to do with what’s left: You should now have a general idea of how much money you have left after mandatory expenses and expenses that aren’t changing anytime soon. Take a look at what you have left and figure out where you want to put it. This can (and will) change a lot, but I like to have a general idea of where I want my money to go. For example, I like to set aside $25 – $40 bucks each month for a new piece of clothing. Try to come up with a few categories where you can aim to put this other money. It could be going out, more saving, or really anything else you desire.
6) Track your spending and adjust accordingly: This is the key step. Making a budget isn’t enough – you actually need to track it and stay on top of it! You’d be surprised to see where your money is really going once you watch it closer. Those late night trips to the convenience store for snacks or that morning coffee can really add up fast and until you really take a closer look you’d never even know it. I like to use the budgeting app Mint to track my spending so I know where I’m spending my money. After you track your spending for a few weeks, you’ll be able to tell where your budget is going astray. You can then figure out what you can cut out to hit the important goals.
How About You?
While I’m not sure if anyone is reading this blog yet, if you are out there beloved Paper Stackers reader, please comment and let me know what you think of my budget. After writing it out I realized it seems way more complicated than it really is. I promise it’s not! How about you? What do you like to do for a budget? Is it easier than mine?