Budgeting can be cumbersome, but what i’ve found is you must be strict enough with yourself especially if you have goals in mind. To effectively budget involves understanding your financial situation, setting goals, and consistently tracking your income and expenses.
Here’s a step-by-step guide:
1. Evaluate Your Income
• Too many people are living beyond their means trying to impress others when no one really cares. You ought to start by calculating your total monthly income, including wages, side hustles, or passive income. Use your net income (after taxes) to plan realistically - this is so important. I often hear people talk about gross income when that literally doesn’t matter when it comes to actually paying for stuff. The only time it semi really matters is when you are applying for a mortgage. Once you know how much you take home, divide it and set up AUTOMATIC disbursement of the funds into different accounts: (roth IRA, savings for car, savings for trip).
2. Track Your Expenses
• Record all your expenses for a month, categorizing them into essentials (rent, utilities, groceries) and non-essentials (subscriptions, dining out).
• Use apps like Mint, YNAB, or spreadsheets to stay organized.
3. Set Financial Goals
• Short-term goals: Save for a trip, pay off a credit card, or build an emergency fund.
• Long-term goals: Invest, save for retirement (it’s never too early and it’s never too late…you should’ve started yesterday so start now!) or buy a home.
• Prioritize goals to allocate funds effectively.
4. Choose a Budgeting Method
• 50/30/20 Rule: Allocate 50% of income to needs, 30% to wants, and 20% to savings/debt repayment. This is just as a example, however at least 15% of your income should go towards your investments. You should have a goal of putting away your first $100,000 in the market before you go out and buy a home! After you’ve invested $100,000 into the market buying ETF’s your net worth will snowball like crazy! (look up compound interest with $100k invested and expect a 10% return on your ROI over the next 40ish years assuming you invest in the S&P500 - this is based off previous performance and assuming the same roughly in the future)
• Envelope System: Use cash for categories like groceries or entertainment to avoid overspending (not my personal favorite, but it seems to work for some people)
5. Cut Unnecessary Expenses
• Identify non-essentials that can be reduced or eliminated (e.g., unused subscriptions or frequent takeout). You’d be surprised how much you’re spending in these subscriptions!
• Look for ways to save, like meal prepping or shopping during sales.
6. Build an Emergency Fund
• Save at least 3–6 months’ worth of expenses for unexpected events like medical emergencies or job loss.
7. Pay Off Debt
• Focus on high-interest (CREDIT CARD) debts first (debt avalanche) or start with the smallest debt for psychological wins (debt snowball) alias stop OVERSPENDING. Half of the things you’re buying you do not need!
a. Did you know you can just make your own deodorant at home?? It’s cheaper, and safer (coconut oil, lavender essential oil, and baking soda)
b. Use Vinegar for cleaning at home - safer for the home, and cheaper!
c. Stop overusing detergent when washing clothes! Use the little cup that’s provided! You actually don’t need a lot of detergent
d. Fill up your car every 2 weeks instead of every week. Which means stop driving for the sole reason to drive. Use your gas and mileage wisely!
• Consider consolidating or refinancing for lower interest rates.
8. Automate Savings and Bills
• Set up automatic transfers to savings and scheduled payments for bills to avoid late fees. - SUPER IMPORTANT!!!
Broke people React, Smart people Forecast!
9. Monitor and Adjust
• Regularly review your budget to ensure it aligns with your financial goals and adapt as circumstances change. - This should be done weekly if you are new to learning the ropes or monthly if you’re a veteran
10. Stay Disciplined
• Be consistent, avoid impulse purchases, and remind yourself of your goals to stay motivated.
Be well.
Join the conversation:
Xx,
Yelena
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