Personal Finances, Part 1: Writing a Budget

I was talking with a friend the other day about budgeting and when I mentioned that I write out a budget for my expenses, she was surprised.  I was surprised that making a budget was so surprising.  Apparently, not many people take the time to plan out their expenses.  I’m here to give you a quick an easy approach to budgeting.  Taking a few minutes to figure out your expenses pays off in the long run.  (Pun intended.)

I’m no investment banker, but I have managed to live within my means – even when those means were very small.  I’ve succeeded because I know how to budget.  To share my knowledge, I’ve created a series of posts to share the basics of money management.   This week: budgeting!

Budget Early, Budget Often

Whenever I’m planning a move,  get a new job, or my expenses are about to change, I make a new budget.  By planning ahead I’ll make sure I don’t end up with a lease to an apartment I can’t afford, car payments that are too high, or not enough money for groceries.

Pro tip: make sure you’re starting with your net income (i.e. after taxes, retirement savings, insurance premiums, etc. have been deducted)

Budgeting is simply mapping out where your money will go.  The following expenses should be accounted for:

1.       Housing:  This is where the biggest chunk of your money goes.  Keeping a roof over your head ain’t cheap, but it is important.  A general guideline is that rent shouldn’t exceed 1/3 of your income.  If you make $3000 a month, find an apartment for $1000 or less.  This way you’ll have enough left over to pay for everything else.
2.       Utilities: All those pesky services you like, such as electricity, water, garbage, phone and internet.  Estimate how much you spend a month on utilities and subtract that from your net pay.
6.       Loans/Debt: Add in your monthly loan or credit card payments.  A later post will give you my tips on avoiding credit card debt.
3.       Food: Everybody eats.  I budget $200 a month for groceries for myself.  I happen to live in a place where food is expensive, so you may be able to get away with less.
4.       Gas/Car Insurance:  If you have a car, factor in the cost of your insurance and how much gas you use in a month.  With gas prices wildly fluctuating, your best estimate will have to do.  Maybe you don’t drive.  How much does that bus pass cost each month?
5.       Savings: Savings is something that is often overlooked, especially for optimistic people in there twenties who believe that nothing could possibly go wrong.  Saving money is very important though.  You never know when your car will need maintenance or you’ll be offered a job in another state and need to move ASAP.  Having a robust savings account is very helpful in these situations.  Saving money is also a good habit to have.  You’ll never regret having money in the bank.  I usually aim for at least 10% of my income.  If I can save more, I do.  If 10% seems like too much, try 5%.  The important thing is to save something.  Put that money in your savings account as soon as your paycheck is deposited.  Better yet, set up an automatic transfer so you never even see the money.  It’s far too easy to spend money if it’s sitting in your checking account.
7.       Other expenses:  If you have any other miscellaneous expenses (netflix, magazine subscriptions, etc.), factor those in.
8.       Fun Money:  What you’re left with after all you’re expenses have been taken out is what I like to call “Fun Money.”  This is for movies, shopping sprees, eating out, or whatever else you like to spend money on.

There’s plenty of software and websites that will help you budget.  I’ve always been a fan of an Excel spreadsheet though.  WordPress won’t let me attach a spreadsheet, but here’s a Word document with a budget outline for you to fill out.  Soon you’ll be on your way to financial success!

Next week: Tips for following a budget.  Now that you’re an expert at creating a budget, I’ll give you a few tips for sticking to it.



  1. zoewalmer · · Reply

    Awesome post, Heidi. I love budgeting like nobody’s business, although sticking to the budget is always the harder part. Have you used It’s amazing for budgeting.

  2. I’ve looked into, but I do my banking with a credit union that doesn’t interface with them. It looks pretty cool though, at least to those of us who thing budgeting is the coolest thing since sliced bread.

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