How to Plan your Budget & Live your Best Life | By Alana Robin
There are a few things in life that are universally accepted as important and of value: family & friends, time, and money. As young kids we are told about the importance of all three and are given instructions on how to be a good family member / friend, and how to best manage our time. Yet, we are not universally taught how to budget our money.
Money is the leading cause of stress for Americans. Everyone can alleviate some of the stress by properly budgeting and monitoring their finances starting from a young age.
Today, I will be telling you my best tips and tricks to setting a budget and then maintain it moving forward. As a 20-something, post-grad, it is incredibly important to start off on the right foot by getting into the habit of proactively managing your money.
Determine Your Take Home Pay
Before you can get into budgeting, you need to determine your take home pay. This is the amount that comes to you once or twice a month post taxes, loan payments, and benefit deductions.
Budgeting based off of this number is incredibly important as this is your true pay and will ensure you are always able to cover your taxes, loan payments, and benefit deductions (i.e. insurance fees, transportation benefits, 401K).
Deduct Your Recurring Fees
Once your know your take home salary, deduct all of your recurring fees to see what money you have to "play" with each month. Recurring fees include:
Rent (If you want to know if your rent is reasonable, check out my post on determining your rent budget!)
Utilities
Wifi
Netflix
Gym membership
Any other subscriptions you have!
Set Targets for Your Key Areas of Spend
Food
Setting your food budget covers two areas of spend: groceries & meals out. I set mine based on both what I historically spend and what I believe I should be spending.
Groceries: How much do you typically spend on necessity groceries each week? Aim for a reasonable amount that includes a few fun snacks, veggies, and other items you buy.
Meals Out: It is no secret that I love going out to eat! I budget my meals out based on 8 meals out a week (2 brunches, 2 dinners, and 4 lunches). From there, I look at my average meal ticket. It tends to be $10 for lunches and $30 for brunches/dinners. I get the $30 based on that some meals without drinks are $20, but some fancier meals with drinks are $40 in Manhattan.
Keep in mind: there are plenty of weeks where I don't have 8 meals out or pack lunches, but I believe in budgeting my full wants on food to give myself some flexibility as it is a key area of spend and interest for me. Anything you love, you should budget in full and then cut back in an area that is less important to you! This will ensure your budget supports you #livingyourbestlife.
Activities
Budgeting for activities is setting aside money for anything you like to do!
I put aside a little money in this category for a broadway show, comedy show, or whatever else comes up that I might want to do. This is my smallest category of spend, as I try to do free activities. This category is really up to you and your lifestyle to determine what you want and can afford.
Transportation
This is where you want to budget for gas, train tickets, airline tickets, car repairs or anything else that might come up. This again varies a lot by person and by location where you live. I found a comfortable amount that keeps me from going cab-crazy, but also allows me to live my life a little bit and cover a few flights a year.
Beauty
This is another category that I set up conservatively. I used to go for gel manicures twice a month and realized I really would rather spend the $60 on fun meals with friends, so now do my nails myself. I would set this to cover hair cuts, nails, waxing, or any other recurring beauty spend you have.
If you find that your budget is getting tight by now, this is an area where I would question the necessity of some of the services. At home wax strips are actually quite easy to use (*wink-wink*)!
Shopping
Oh baby, do I love to shop?! I put this as the last category, because it is the most in your control. Before you set your shopping budget, take a look at what you have left.
I set my shopping budget as less than half of what I have left over.
This is a personal choice, as I want to put a certain amount into my savings each month (going to need a downpayment on a house one day!) and need to force myself to try to cool it on the shopping. See what you can afford, what you want to save for, and set the category in a way that works for you to reach those goals.
Plan Out Your Savings
This will be the money you have left over when all is said and done.
If you are saving for something specific, I would actually set this category before you go through budgeting for your other areas of spend. If not, then consider this a goal that will fund something exciting in the future and try to set aside some money here once you know how much you have left after your living expenses.
I personally try to increase the amount I put here periodically and decrease some of my fun-spend, that way I have some money set aside for trips and future major life purchases!
Monitor and Manage Your Budget
Keeping tabs on the budget you set is the only way to make it work for you!
There are many, many apps that you can use to manage a budget and keep track of your spend, but I would actually recommend doing it yourself. Manually sorting through your spending ensures that you have an eye on every purchase and see where you could have made better choices. I have a google sheet where I input everything each month from my credit card bill. This is also great because it ensures I closely check that for fraud, which is important too.
I have a few tips and tricks of what to look for in each category as your monitor and update your budget:
Food: If you are consistently going over, or having a few very large tabs, think about what when into those reciepts. Did you go a little too gourmet at the grocery store? Buy too many fancy cocktails out? Order too much takeout? Whatever it is, take a weekend eating in to reset your budget and get back on track.
Activities: If you are off budget here, consider the surrounding months. If I want to get more expensive tickets to something, or have a trip coming up, I try to hold off on spending on activities for a few months and view this category as a combination of a few months. This helps ensure that at the end of the day you are staying on track!
Transportation: Similarly to activities, if I am buying a flight, I try to be extra good about taking public transportation or carpooling in Ubers for the month or surrounding months to offset the higher cost.
Beauty: This is one where you really just need keep tabs and see what is necessary for you. If you get a lot of joy from your manicures, keep budgeting for them! If you think the payoff isn't there, decrease this to only cover haircuts and things you cannot DIY.
Shopping: I keep tabs on my shopping and if I go a little too hard one month, cut it way back the next. I find summer and the holiday season are peak spend times for me with all the sales and gifts, so I balance it out in other months. Keep an eye on if there are bigger ticket items you want, don't buy any fast-fashion for a few months!
Savings: Savings are such a personal topic and how much you can put here is going to be dependent on what your salary is, student loans are, and cost of living in your city is. Don't be too hard on yourself if you can't save much right out of college, but try to do what you can. Prioritizing saving from a young age will just make your life a less stressful later on.
After 2 or 3 months of following this process, I would recommend revisiting your budget categories and seeing if they need any updates! This will ensure you are spending money on the right things to live your very best life.
Would you guys like me to make a spreadsheet to email around to help you get started on your budget with ease?
XOXO,
Alana Robin
Full disclosure - these are budget tips for a 20-something just getting started in the working world! You will need to budget differently if you have a kid, mortgage, or other major life expenses that I am currently not qualified to offer advice on.