Let’s be real, you can’t successfully “adult” without creating a budget for yourself. If you don’t create a budget, you’ll probably be overspending and creating debt. And part of being an adult is managing your finances. So how can you quickly create and follow a budget and start “adulting”?
Follow these six (almost) painless steps:
STEP ONE: Track your spending for a month. There are many ways you can track your spending from a good old notepad and pen, to apps on your cellphone. Regardless of how you choose to track your spending, track it. This will help you get honest with yourself about how much you’re spending where and it will help you create a budget that is realistic.
STEP TWO: Evaluate your income. Look at the paystubs you’re bringing home. How much is actually going in your pocket each paycheck? You can’t start creating a realistic budget for yourself until you get honest about how much you’re actually bringing home after taxes and other automatic deductions (which hopefully includes a 401(k) contribution).
STEP THREE: Gather all your fixed expenses. There are certain expenses you will have each month like clockwork. These expenses include utilities, insurance and transportation among others. If you’ve tracked your spending for at least one month before beginning to create your budget, you’ll have a rough estimate of what you might spend on these fixed expenses.
STEP FOUR: Set micro budgets for additional spending. We all want to be able to buy new clothes every now and then. Most of us would probably also like to partake in entertainment and eating in restaurants every so often. That’s all okay. Just set micro budgets for yourself and stick to those. (IE: $100/month for restaurants, $75/month for clothes, etc.)
STEP FIVE: Set an amount to contribute to savings each month. You absolutely must build an emergency savings. You can’t plan to live paycheck-to-paycheck, because it’s inevitable that an unexpected expense will pop up. Even if it’s only $25 a month, designate an amount to add to your savings each month. Better yet, make it an automatic transfer from checking to savings.
STEP SIX: Stick to the plan and watch it pay off. It may seem like living on a budget is a sacrifice, but after doing it for a month or two, you’ll see how freeing it feels to know where your money is going and to build your savings.
If these six steps feel like too much to handle, stop into your local Centra location and ask for help. One of our Centra staff members will be happy to create a budget with you and help you adult like a pro!