Author disclaimer: I’m not a financial professional or expert. This is how I manage my budget and what I’ve found works best for me. I highly recommend speaking with a financial professional when making financial decisions.
I’ve gone back and forth on how to write a blog post about budgeting a million times. Ultimately, I’m not a professional who can come up with a budget for every person. But what I can do is share my perspective and how I look at money (because it works for me). It may not work for you, but maybe it’ll help get you started, or give you some new ideas.
I’ve found that tracking my money is something that helps me stay on top of my financial goals. The first place to start doing this was creating a basic budget. There are 4 steps I followed to set up the framework of my budget.
4 Simple Steps to Making a Budget like Amanda
Step 1: Assess how much money you have coming in and how much you have to spend every month to survive. Think: rent/mortgage, car payment, insurance, utilities, debt, other bills, etc. Ideally you’ll have money left over to dedicate to savings and other things.
Step 2: Prioritize how your left over money should be allocated. What non-monthly expenses do you have (annual subscriptions, car tags/registration, quarterly taxes, etc) that you should put money aside for? How much do you want to save per month? What are your financial goals and how can you make your money work towards them?
Step 3: Track your spending. The purpose for this is to know where your money is going. Knowing where your money is going will help you stay on top of your goals.
Step 4: Evaluate and adjust your budget based on your spending (annually or quarterly)
I do all of this in Excel or Google Sheets because it’s easier to set up basic formulas to do math [=sum(cells) is the one I use the most. Plus this allows me to move things around as I’m working through my budget process.
In the example above, I set up a scenario of an income with 2 pay checks per month. I separate my budget into 2 categories: Outgoing and Sinking Funds. Outgoing represents monthly expenses that are required to be paid every month. Sinking Funds represent savings and miscellaneous expenses. On the bottom left, the first line is the total amount of money coming in, totaling $3,500. Subtracting $2,010 for Outgoing and $1,064 for Sinking Funds, leaving me with $426 for anything else not budgeted.
By creating budget categories, I’m creating a system where I know about what I can expect to pay on any given month for something. I also end up with a system that allows me to assess how much I’m spending in a specific category every year so I can re-evaluate annually.
I have a hard time explaining sinking funds, but JenPlans does a great job! Check out her video on sinking funds for another explanation. The way I think about it is that sinking funds are mini accounts within your budget that you add money to every month (ish) and when you need it, the money is there. In the example above (and in my personal budget), I’ve created mini funds for everything that I typically save for. Things like my Amazon Prime bill or pest control bill aren’t concerning when they come up because I have money stashed away to pay them when they come up.
Personal finance and budgeting are very specific to each individual, and what works for me may not work for you. If you’ve found what works for you, share it with us in the comments!