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The Art of Budgeting: Tips & Tricks

Understanding a Budget

First thing’s first, what is a budget? A budget is a self-made guide that helps inform your desired spending habits and track them month to month. There are plenty of budgeting apps, guides, tools, etc. all over the internet that can show you how to budget. In this blog, I want to focus on the art behind budgeting.

With all that in mind… let’s talk about budgeting tips & tricks.

Budgeting Tip: Optimal Techniques

For starters, the ideal budget system is a strict breakdown of income as follows:

  • 50% of your income is used to pay all your necessities

  • 30% of your income can be put toward non-essential spending and other wants

  • 20% of your income should be put into savings

If you’re a Christian like me, you can play around with the non-essential spending and savings to accommodate your tithe and offerings. I’ve built my budget around my tithing because that reminds me to remain faithful to God financially. 

As an example of how to flex your budget to your lifestyle I’ll share my personal budget breakdown. Knowing I’m not a person who wants many things, I allow more of my extra cash to be considered a “flex-necessity” where I inflate my debt payments month-to-month instead of spending. This is because I am prioritizing paying off debts and building up my savings. My goal is to be completely debt free before I am 50, including having no mortgage payments!

My budget ratios look like this:

  • 10% of my income goes to my tithe and offerings

  • 75% of my income is used to pay all my necessities and debts

  • 5% of my income is put toward non-essential spending and other wants

  • 10% of my income is put into savings

Identifying Necessities

A necessity is defined as things you can’t live without. For a common household that would include your rent or mortgage payment, utility bills, insurance bills, groceries, and other non-negotiable expenses like loan or credit card payments. My common rule for identifying your necessities is this simple question: “If I lost my job tomorrow, what could I cut back on and still feel comfortable in life?”

My answer is always a place to sleep, food to eat, basic utilities, and some form of transportation. While the preference of these necessities vary from person to person, I feel like the explanation is sufficient for you to start understanding your own budget breakdown.

Managing Discretionary Expenses

Non-essential spending and other wants is literally everything else. It’s that simple. Think of the times you go out to eat. Or the numerous streaming service subscriptions you may have. Perhaps it’s buying that tenth pair of shoes that looks just like the other nine you own but you promise yourself it’s a different shade of black. 

Other wants include special events, traveling, or bigger purchases. Have you always wanted to go to the Superbowl? Do you plan to visit family for the holidays? Are you and your friend going to some crazy concert where the tickets are worth hundreds, and you’d probably spend another couple hundred on your outfit? Have you been dreaming about getting a tattoo or a new couch for your place? These all fall in the wants category of the budget.

Types of Savings and Goals

As self-explanatory as it is, I still want to talk about this because savings is not just money you put into a savings account. Savings can take many forms depending on where you’re at in your financial journey. There are two types of savings:

  1. Emergency savings - at a minimum you should have 3-6 months' worth of emergency savings. This amount varies person to person, but it essentially would be the money to help cover your necessary bills if anything unexpected happened and put you out of work. For example, if your monthly necessities came out to $2,000 a month, you’d want an emergency savings of at least $6,000-$12,000. A great emergency savings account can get you through 12 months without too much financial stress.

  1. Long-term savings & purchase goals - most other saving endeavors fall into this category. Think about any major purchase you want to save up for like a car or a house, maybe a trip to Italy? I don’t know your life goals, but savings helps you achieve them. The other part of this I like to remind people of is long-term financial planning. How much money do you want for retirement, when do you want to retire, do you want to set up an inheritance for your kids? All of these things are considered part of savings. Deciding what you want and building a budget around that can help you accomplish such goals.

My Advice: You should not be worried about long-term savings or big-ticket purchases until you’ve generated enough savings to hold as an emergency fund for yourself. I’ve also had a lot of success having one account for emergency savings and other accounts for long-term investing or savings to help keep me organized.

Assessing Your Expenses

I can’t tell you how many times I’ve talked to people about their finances, my family included, and heard the phrase “I just don’t know where all my money’s gone!”

My question to them is always, “Are you paying attention to your spending?” This is why I recommend budgeting to literally everyone. And will continue to do so until I’m blue in the face. I promise it’s not daunting to start, and with all the technology in the world as well as videos on every platform with budgeting advice I’m sure you’ll find a method you understand that sticks.

I don’t do anything crazy for myself personally. I built a simple excel sheet that I modify as my expenses change. I prioritize my tithing first, my necessary expenses second, my savings third, and anything that remains I just consider a “fun cash” pile.

My Budgeting Tricks:

  1. Take your average estimate of your annual income, divide that by twelve, and set that as monthly income. (Example: you take home (after tax) $50,000 a year, your monthly income is $4,166.67 (=50,000/12) or $4,100 to make it even). My advice: round down on your income. Do not round up. Like many other things in life, there ain’t nothing but hurt feelings and unrealistic expectations when you round up.

  2. Take your monthly income and multiply that by 0.20 (for 20%) and this is how much you would ideally save per monthly period. My advice: start with 20% then adjust as needed after you calculate your necessities. I’ll be the first to say saving 1% is better than saving none!

  3. Take down all necessary expenses, estimating the variable amounts as best you can to estimate your monthly needs. My advice: this is where you round up and be brutally honest with how expensive things are. If you lie here, you might as well just stop budgeting because it won’t work anyway.

  4. Subtract your savings balance and your necessary expenses from your income for the month. What remains is your flexible spending cash. My opinion: flexible spending can change from month to month and over time as your income changes or the economy. Do not put too much weight on this number.

A fun step you can do after is to see what your budget spread is. We talked at the start about how the recommended spread is a 50/30/20 for households. If you want to know yours, and your budget app or process doesn’t tell you, here is how you will calculate your percentages:

Percent expenses = ( Total of all monthly expenses / Total monthly income ) * 100

Percent savings = ( Total monthly savings goal / Total monthly income ) * 100

Percent spending = (( Income - expenses - savings ) / Total monthly income ) * 100

All budgets are unique to each scenario. Some may have more expenses, others may prioritize saving or spending. What matters the most is understanding where your money is going and how to better align yourself to your goals.

(Below here is the life story part you can skip. I included it to be more relatable and put it at the end if you haven’t bought into my bologna yet. You can thank me in the comments if you appreciate this format!)

My Experience 

Life is crazy. Life is lifing. Aggressively. All the time. I’ve been in the position where I’ve had to drop $2,500 on my car in one month to keep it functional. I’ve gotten down to pennies in my checking account. I grew up with a loving single mother who struggled to dodge overdraft fees and utility shut offs just to feed her four kids. I knew nothing about budgets, personal finance, taxes, credit scores, or any of that crap.

I. Get. It.

But I swear by budgets. I was spit-broke in a one bedroom apartment, barely making ends meet as a server working doubles trying to get through college. 

About six years with a budget and discipline I’m a homeowner. I’ve bought my dream car, an ‘09 VW New Beetle with a sunroof, and completely paid off the loan in record time. I have enough emergency savings to get me through about 6 to 8 months of unemployment. I have a 401k and three life insurance policies, one on my husband and two on myself. I feel like I can tackle anything life throws at me.

While I have educated myself on all the other nonsense, like taxes and the world of credit, if I took all that knowledge away and just followed a budget I’m confident I’d still be where I am today. Or pretty damn close.

So all that to say, what are you waiting for? Get yourself a damn budget and take control of your money once and for all. You got this!

Author’s note: This is a not-blog blog. There will be no long-winded introductions, no weird backstories from childhood memories, and absolutely no pointless paragraphs of text about things you’d rather have a “skip to the important stuff” button to bypass.

I hope my posts are helpful. I try to break these things down in a way that is easy to read and understand. I appreciate any feedback on how to improve, so feel free to leave a comment below. If you are simply enjoying the content, I’d love to hear about that as well!

Disclosure: I am not a licensed financial advisor. I have an accounting degree and am a business major with a certification in finance, but I am not a legal expert. These posts come from my personal experience, learning through trial and error, working in the banking industry for nearly a decade, and seeing the fruitfulness of this advice in my own life.

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