PSA: The YBC® App is now available for iOS devices. We are working hard to fund Version 2 which will support Android devices. A YBCer created a GoFundMe in support of it, if you'd like to contribute. Don’t forget that we are also hosting our Kenya Safari Yoga Retreat
Since I’ve started talking more and more about money, I’ve received so many DMs and comments on finance so I wanted to start a Finance Series to help YBCers hone their money skills! Today, YBCer Felice, a financial analyst shares her tips for Budgeting 101. Let us know if you can relate or if you find this helpful in the comments below! XO Candace
With a New Year upon us, there is no better time to get a hold of your finances and create yourself a budget. In this post I’ll explain the various methods of creating a budget, as well as go over some tips on where to cut back and where to save.
Show Me The Money
When you are starting a budget there are a few things that you need to do. I am warning you, if you’ve never done this before, you may be shocked and a little overwhelmed. But it’s okay! There’s always something you can change to make things better.
First, you’re going to write down all your expenses and everything you’ve spent money on. Try to go back as far as you can, but one month is fine. Then, you’re going to write down how much money you have earned in the same time frame. Hopefully, you are bringing in enough money to cover your expenses. If you aren’t, then a budget is perfect for you! However, even if you are doing well monetarily you should still consider a budget because it is really meant to empower your money and spending habits.
Starting the budget
So now that we know how much we have coming in and going out, we can appropriately allocate where we want our money to go. There are a few different methods or “rules” that I am sure you might have heard of. The most popular one being the 50/30/20 rule. This rule states that 50% of your total income should be spent towards necessities (housing, bills, car, taxes), 30% should go towards paying off your debts and/or saving for retirement, and 20% spent on any dining, entertainment or shopping (non-essentials). I have seen some articles that interchange what the 20 and 30 percents are, but the 50% is always for necessities. Perhaps your goal can be to pay off your liabilities sooner, so you keep it at 30%.
I would suggest taking those expenses that you looked at and categorize them into the Necessities, Liabilities, and Miscellaneous categories. If you don’t fall into the 50/30/20 allocation, that’s okay - try and look at things you don’t need to buy or spend money on. Or, you can try and see if there are any simple ways to lower your bills. On the flip-side, if you’re falling within the split, then you are able to look at where you can cut back and save more. Perhaps you’d like to start investing with those savings?
Below is an example of how to allocate your money. My boyfriend and I keep a budget and we share it using Google Sheets because we can pull it up on our phones or at work. I left the equations that I used for you as a reference below:
Where can you save?
Just like with anything, if you want to see results, you will have to stay disciplined. I know what things I can cut-back on, and what things I really don’t want to sacrifice. For example, in our house, we like buying high quality food so we’ll shop at a Fresh Market or Whole Foods, but we don’t need to get coffee every single day because we bought a coffee machine and make it at home instead of going to Starbucks or Dunkin’ — which adds up to a lot of savings considering one cup is on average $4.00 x 2 people per day. In addition, when we bought our house I ‘cut the cord’ (streaming services as opposed to cable) and save about $50 a month. We use the savings to help furnish our house and to afford a nice vacation this year.
I suggest looking at your budget and spending habits as often as you can. See what you’re spending things on and why you’re buying them. Also, another important thing - don’t be so hard on yourself! If you’re a little over, look into why this may be the case and make adjustments. Did you go out for a friend’s birthday? Did you have to buy a new dryer? These things happen and there’s no shame. Stay focused and I am sure that your margins will improve in time.
You’re On Your Way!
Creating a budget is a useful way to plan your spending and a great first step in becoming more financially stable and knowledgeable. With a small investment of your time, you can have more power over your finances.
If you have questions regarding budgeting apps, feel free to ask in the comments below. I am happy to answer any question.
Felice is a financial analyst by day, and crafter by night. She can be found at 1001knits.com or @1001knits on Instagram and Facebook.