B R O K E.
We’ve all been there before and if you haven’t, then perhaps this post isn’t for you.
At some point, we’ve all been the broke bitch who had to figure out if she was going to use the last $7.00 in her account to put in her gas tank or swing through a drive-thru. Or, maybe you learned the ability of stretching when you made that last $20.00 stretch until a week later when you got paid again.
It’s absolutely nothing to be ashamed about. We live, we learn, we grow. What there is to be ashamed about though is if you allow yourself to keep reliving that same cycle, especially when or if your circumstances change.
When you begin to make more money, that doesn’t mean you should spend more. When you get a bonus or an unexpected check, that doesn’t mean you go out and blow it because once it’s gone, it’s gone.
The wakeup call for me was scanning through my poor bank statements and realizing that my poor money was going down the drain. My bills were getting paid and I had a roof over my head, but where was the rest of it?
Ashamed as I am to say, most of it was going to things I can’t even remember. I scanned a bank statement for one month and realized I’d spent over $500 on food. Not grocery shopping or meal-prepping — but eating out, unnecessary lunches, and multiple Starbucks visits.
Now, I will never be one of those bloggers who tells you to cut out every penny unless it goes towards savings or bills – the joy in my life isn’t set up that way. I like buffalo wings, margaritas, and caramel ribbon crunches. We work hard and we deserve to treat ourselves everyone once in a while; we just have to learn to put some discipline behind it & that discipline starts with a budget.
Budgets can be scary and intimidating and sound like something you need to walk into your bank and make an appointment with an advisor for, but you don’t have to. I can guarantee you everything you need to make a budget is right in front of you.
“First things first, I’m the realest ..”
Iggy said it, and I can guarantee you with this first step to starting your budget,
it’s about to get REALLY real.
Before we dive off the deep end into numbers and more than likely a bottle of wine by the time we’re done – think about why you want to start a budget in the first place?
After-all, you need to have some type of motivation for this to work and for you to remain consistent. Some common reasons may be:
- Because I’m broke AF.
- Saving for a new car.
- Home ownership.
- Getting out of debit (paying off loans/credit cards/etc.)
- Peace of mind.
Whatever your reason may be, keep it in mind as we go through the steps which may become a little intimidating, but at the end of the day, are necessary if you want to reach your goal.
1. Analyze your bank statements. Download it as a PDF online, print it out – whatever you need to do to be able to take a full, comprehensive look at your statement for a full 30-day time period. To make it even more comprehensive, print out at least 2-3 months. This way, you can have a better idea of what your usual spending habits are and it can eliminate things that may not be average or reoccurring that may have caused a spike in your spending such as an emergency or an unplanned expense.
Use a notebook on the side to make a note of your spending, starting with your fixed expenses (rent, mortgage, car payment, loans, etc.). These are basically the same bills you have to pay each and every month no matter what. Some of these numbers may vary for things like your electric and gas bills or groceries, but if you’re scanning more than one bank statement, just take a general average and list it. An example would be:
- Rent: $1,000.00
- Electric Bill: $30.00
- Gas Bill: $50.00
- Groceries: $250.00
- Student Loans: $400.00
- Car Insurance: $150.00
- Car Payment: $350.00
I do this step first for one main reason: the shock value. A lot of times we float by month by month without really know what we’re spending – we just know we’re paying it some way or another.
2. Add up your income. Now, if you’re still looking at your bank statement, you may be wondering what we’re going to do with all of the spending/charges that didn’t fall into the category of being a fixed expense. We’ll get to those later.
For right now with the total amount of our fixed expenses in mind, we’ll add up our income and see how those two compare. An example of documenting your income would be:
- Employment Income (Monthly): 3,000.00.
* this number should be based on the month so if you are paid weekly or biweekly, calculate what your total monthly income is. In this example, $3,000 represents $1,500 bi-weekly.
3. Add up your discretionary expenses. These are expenses, also called variable expenses, are those that can vary month to month or aren’t critical to have, such as shopping, eating out, beauty (nails/hair/waxes), subscriptions (Hulu/Netflix/Apple Music), etc. An example would be:
- Apple Music: $11.00
- Hulu/Netflix: $15.00
- Nails: $65.00
- Waxes: $50.00
- Eating Out: $100.00
- Credit Card Payments: $150.00
- Other: $150 (tolls, clothing, etc.)
4. Add and subtract. Now that we have both our fixed and discretionary expenses broken down, we’ll add them together.
- $2,230.00 (fixed) + $541.00 (discretionary) = $2,771.00
Next, we’ll take the total amount of expenses we just calculated and subtract it from our monthly income:
- $3,000.00 (monthly income) – $2,771.00 (total expenses) = $229.00
5. Decide where to go from here. Now, here’s where you need to make some important decisions. For one, what are we going to do with the $229.00 leftover?
If you get a positive number, this ultimately means you make more money than you spend. If this is the case, you may be able to go back and adjust your budget and add a savings category to move money into your savings or apply more money towards your debt payoff.
If you get a negative number, this means you are spending more than you make and you need to adjust your budget either by decreasing your expenses or finding a way to increase your income.
From here, write out a list of your fixed monthly expenses, which again, shouldn’t change much. For your discretionary expenses, give yourself an allowance and ultimately decide if you really need them.
If you are struggling to stay afloat each much, cut out some of the unnecessary subscriptions or scale back on the eating out/entertainment until you can remove or lower some of the debts in your fixed expenses or increase your income.
TAKEAWAYS. Your budget is ultimately all about your perspective and what you want to gain from it, i.e. your personal financial goals. A lot of us never take the time to dissect our finances so all we really ever see is money coming in and going right back out.
This budget how-to by no means will apply to everyone’s financial journey nor is it to be used as a by-the-book method; you tweak it to give yourself some realization of your finances and to use it as a starting point to be more in control over your money and spending and ultimately reach the goals you’ve set for yourself.
As you monitor your budget, reflect on your process and progression and make changes as needed (as you earn more, cut out spending, etc.)
Budgeting is by no means an easy task but if you never start,
how will you reach your finish-line?
P.S. If you enjoyed this blog, comment below your budgeting journey and stay tuned for budget worksheets, printables, and more financial tips & savings advice!