Writing #15: Budgeting… I don’t know about that

Shout-out to @jeanixAngel, thanks for the idea and comments. It took me some time, but I’ve been working on this budgeting post for you. Hopefully this helps you, either way feel free to touch base again. 🙂

Budget is telling quote_thumb[1]

Before we can have a budget, we must answer two questions.

  1. Why are we budgeting?
  2. How do we budget?

The why is specific to you, but I can help with the how.

I’m someone who carefully watches money due to being raised with the insightful experience of being one who never had enough. Pinching pennies has a new meaning: especially when you only have pennies to pinch. I budget because money fascinates me, and tracking it, processing it, and making it grow is fun.

But that’s me. Not everyone is this fascinated with dollars and cents, it’s mostly the trying to make sense of it that can be a stress factor.


Step 1: Take a deep breath and face… the dragon

This is going to be different for each person. There is that person out there, swamped in debt, for which even the thought of budgeting is  a stress factor. There are people who never budgeted their money before: a spouse, financial adviser or someone else would do it for them. And then there are those who have tried budgeting and promptly threw it out the window.

This can be tough, so it’s important to go somewhere without distractions, somewhere that relaxes you, and has positive associations for you- while also being safe to break out this sensitive information. For me, it’s my bedroom, lying on the bed with my laptop on a pillow. I’m not always a “sit-rigidly-at-a-desk” person when I work on my budget.

Once you have the setting situated, you’ll need access to your financial information. To start off, I only had my bank account information, my paystubs, and my monthly living expenses. I could access my banking information and earnings via my computer, so I had that plus information on paper regarding what I paid for rent and utilities.

  • START OUT SMALL. The worst thing that can happen is that you become overwhelmed by all the bills and looming debt you might be facing. Also, this is like a first date, ease into it gently and feel free to take a break and walk away if you do get whelmed. Money can be an emotional thing.
  • IF YOU LIKE MUSIC, PLAY SOME IN THE BACKGROUND. I like listening to soothing music, such as the soundtrack for Babylon A.D. or Assassins Creed I-IX or whatever number they’re up to these days. Even meditation music is nice -thanks YouTube.


Step 2: What are your goals?

Identify your financial long and short term goals. Nothing extravagant, just you and a piece of paper. What do you want to achieve in 6 months or a year? When do you want to take vacation?

Short Term Goals Long Term Goals
Emergency funds (3 times crucial monthly expenses) Children Education
Paying Credit Card Debt Paying towards retirement
Saving for Vacation Paying off mortgage
Saving for car/house
Paying off school loans

List them all out, then rank them from shortest term to longest term. Which one can be achieved the fastest/in the least amount of time? Which goal will be completed in the long term?

After identifying and ranking these goals, proceed to your next step.


Step 3: Currently, where is the money going?

Start off with the revenue, what are you bringing home every two weeks or so? If you look at your paystub, it’ll say things like “net” and “gross” income.

  • Gross income – how much you earn before taxes
  • Net income – how much you take home after taxes and other deductions.

Personally, I try not to get mad looking at the net versus gross, but net is what you have to work with when it’s all said and done.

Now, your expenses:

Expenses (example) $20,000
Crucial monthly expenses: Rent, utilities, etc. $6,000
Credit card debt (monthly) $3,000
Savings: long and short term $5,000
Monthly debt payments $2,500
Retirement contributions $2,500

Be thorough and write it all down. Then calculate the balance leftover from subtracting expenses from revenue:

revenue – expenses = balance

Example: $20,000 – 19,000 = 1,000

Ideally, your balance is either a 0 or a positive number. If this number is negative, that means you’re spending more than you make -a scary thought.  Nevertheless, this is the time to get a clear view of how your spending habits and actual earnings measure out.


Step 4: Intersect goals and spending habits

Time to align your goals with your actual spending habits.

  1. Grab a fresh piece of paper and write revenue on one side and expenses on the other.
  2. Then list out your net pay and other revenue sources under “Revenue”, and your expenses under “Expenses”. See below for a example.
Revenue (example) $ 20,000 Expenses (example) $19,000
Net Pay (monthly) $20,000 Crucial monthly expenses: Rent, utilities, etc. $6,000
Tax returns $      – Credit card debt (monthly) $3,000
Windfall $      – Savings: long and short term $5,000
Etc. Monthly debt payments $2,500
Retirement contributions $2,500

Then Prioritize:

Prioritizing allows you to visualize what expenses you could cut when funds are tight (wants) versus expenses that you must meet (Needs, Savings & Debt).

Needs Savings & Debt Wants (aka optional)
Rent/mortgages Emergency funds Cable/internet
Utilities: heat/electronic/water College savings Phone plans
Groceries Short-term savings Entertainment/restaurants
Child/elder care Credit card debt Gym
Insurance Loans (student/car/other) Personal care
Other Other Other


Short Term Goals Long Term Goals
Emergency funds (3 times crucial monthly expenses) Children Education
Paying Credit Card Debt Paying towards retirement
Saving for Vacation Paying off mortgage
Saving for car/house
Paying off school loans

Now, combine your goals with your priorities:





Step 5: I thought you said we’d be making a budget…?

And so we have. Look above. All we need to do is add numbers -aka your $ amounts.

But I thought a budget would tell me what to do?

It can. If you enter your goals and track them over time, it can be helpful for determining where to allocate funds.

A budget is just a tool, not a coach, not a yelling mother – it won’t “tell” you what to do. It may be that you feel guilty- face that. Why do you feel guilty? Is it because of that Black Friday spending spree?

Speaking of which, start plotting this stuff out before Black Friday and Cyber Monday. I’m trying to figure out how much pocket change I have, plus I’m snapping up all the deals, promo codes, and savings possible (https://blackfriday.com/ is a good site to sign up for- found it this month and I’ve been inundated with coupons since then).

A budget isn’t a scolding mother, it’s a snapshot of where you are, and how to get where you want to go.


Additional thoughts

50/30/20 Rule = 50% budget to Needs, 30% to Savings/Debt, 20% to Wants

Define your rule! For me, the 50/30/20 rule doesn’t work, I got school loans to pay, so it’s more like the 30/60/10 Rule in my case, and that’s fine. Find what works for you. You are unique and different, and so are your finances. Find what make sense for your situation and if it works, don’t break/fix it.

I hope this is helpful. Please leave comments, questions, and critiques. I’m not a financial advisor, but I’ll say (have said) what worked for me. If it helps you, great! 

I’m not quitting my day job yet…

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