Setting a budget is something that we’re all at least somewhat familiar with, but maybe not entirely sure what we’re doing. It’s hard to know what you’re doing, when your knowledge is primarily limited to the personal experiences that you’ve had. That doesn’t mean that it’s impossible to set your own lifestyle budget that works well for you, it just means you may need to try a few different things until you find the right thing.
MAKE A LIST OF THE ESSENTIALS
The main reason any of us make a budget, is because there are essential expenses that you have every single month, that are entirely unavoidable. You have to pay the bills. So start here. What do you have to pay every month? Things like your rent/mortgage, utility bill, phone bill, and groceries are a few of those things. Tally up all of these expenses, and make sure you don’t miss any of them, even the automatic payments for things like Netflix that you don’t notice leave your account because you don’t have to pay the bill physically. It’s still leaving your account, so it needs to be accounted for!
PRIORITIZE THE THINGS THAT ARE MOST IMPORTANT TO YOU
After calculating all of your necessary expenses every month, add in all of the “extra” things you pay for on a monthly basis. Even if these things feel like necessities, if you could live without them for a month, they go in this category. Massages, alternative wellness, eating out, movie nights, home improvement projects, and other things like this would go into that category. Number them in order of which items are the most important to you, the ones you don’t want to live without.
SAVINGS ARE ONE OF YOUR ESSENTIALS
Before you’re done with your lifestyle budget, you have to factor your savings into account. There will always be things that you can’t foresee happening, which is what your savings account is for. You can’t plan every single month for a speeding ticket, car repairs, a visit to the emergency room, or that birthday present for a friend. That’s what a savings account is for! And honestly, your savings account should be one of those essentials we talked about earlier. You pay your bills and put money in your savings account before you get to any of the extra things. And if nothing disastrous happens and your account has gotten big, you can use some of that money on a vacation or that new tv you’ve had an eye on. The key is to actually have a savings account that you’re actively putting money into every single month. We recommend striving to put 10% of every paycheck into your savings account. Do what you can and what works for you.
KEEP YOUR DEBTS IN MIND
There’s a high chance that you have debts, in one form or another. A car payment, mortgage, or credit card, are all pretty common forms of debt. They’re things that you put payments towards every month, but wouldn’t it be great if those monthly payments were gone? That’s the beautiful thing that happens when you’ve managed to pay off your debts. That seems like a pipe dream, but if you’re able to save anything, you’re able to pay off your debts. The best way to do this is to focus on paying off the smallest debts first.
Pay your minimum payments every month, on all of your debts. Then, make an extra payment on your smallest debt. This way, you’ll pay off that smallest debt faster than you would otherwise. Once this smallest debt is paid off, take that minimum payment + the little extra, and apply that to your next smallest debt. The idea here is that you will keep going in this fashion until all of your debts are paid off completely. It’s not overnight and will still take years and considerable time, but working towards actively paying off your debts is one of the smartest financial decisions you can make!
