I used to be the person who didn’t budget and only hoped that I didn’t spend more than I made for that month. I was able to skate by doing this for a year and a half before I realized that there was a better way to track my expenses. That’s when I started budgeting the right way, so as someone who had a revelation, I’m going to try to help you all follow the same path that I took.
How Much Money Do You Make
The first thing you need to check is how much money you make in a month. You can divide this up into months, weeks, or even years. You just need a solid number that you can base all your other math on.
You can either choose to use your pre-tax or post tax income, I recommend post tax as this is actually what’s getting put in your hands but if you want to use your pre-tax income and maybe your 401k contribution as your savings amount then go right ahead just as long as you know what you’re doing with your money.
What Are Your Expenses
The next step is to check to see how much your bills are each month. You can count these as operating expenses for your day-to-day living. Big picture-wise the amount of money that you have coming in should be more than the amount of money you have going out.
Your bills are things that can be looked at as needs, such as you need water, you need power, you may need gas in your car. The other side is wants. You may want to go out to eat everyday but you probably need to just go to the grocery store instead. So make sure you have a solid line between your bills and your frivolous spending.
Follow a Rule
Some people like to use the 50/30/20 (Needs/Wants/Savings) rule as a way to guide how much they spend and on what. I’m not advocating for or against it, but I just want you to be able to choose a rule that you’re going to stick to for the long haul.
The thing that I don’t want you to do is simply track what you’re spending your money on. This is what I did earlier on when I started budgeting or what I thought was budgeting. I simply swiped my card and tracked what I spent it on instead of getting myself a set amount of money to spend on certain things. This helped me become more disciplined, with for example food or going out.
So whatever your rule may be or your plan or your goal, make sure that you stick to it and it makes the most sense for your lifestyle.
Regular Checkups
The last thing I want to mention is to make sure that you do regular checkups. The same person that you were last year is not the same person you are today. So make sure that your financial situation is flexible enough to allow for different lifestyle adjustments.
Whether that’s buying a new car, home, getting married, or having children your budget needs to be able to adapt. And in order for it to adapt you need to do regular checkups just like you would go to the doctor or take your car to get the oil changed.
Rob’s Opinion
Budgeting is a key factor in order to create generational wealth, and I want to make sure that you all are doing it correctly. A lot of times coming out of college or starting your first real job we are so excited at the amount of money that we are making and this is a great feeling to have, however, when you know better you do better, so let’s do better with budgeting for this year.
Like always, if you have any questions please comment them down below. I will try to answer everything in a timely manner, and if you have other suggestions for future topics please do not hesitate to reach out to me.
