If you’re like me, you get overwhelmed by the ridiculous budgets some bloggers try to explain in their posts. You know what I mean:
Oh it’s so easy! You just have to make 19 categories, rate each category by importance on a 100-point scale, then perform a linear regression on the integral of each. Voila…That’s step 1!
I’ve read about many different budgeting strategies and have really tried to incorporate them into my personal finance strategy. What I found with these, though, is that I end up getting overwhelmed and give up – leaving me with no budget at all.
This is why I came up with my only, simple, budgeting strategy. I call it the 000Budget.
My budget is quite simple. It requires only a few steps and is relatively easy to stick to once you get started. Here’s how it works:
Step 1 – Write Down All Sources of Income
First, you have to figure out how much you’re making. Write down all income (after taxes are taken out) from any jobs, side hustles, etc. etc. Be sure to include any money you make off of investments, such as rental properties or stock dividends.
Step 2 – Write Down All Expenses
Write down all of your regular expenses. I like to keep my expenses in pretty general categories, such as Food, Clothing, Rent, etc., instead of very specific categories like Breakfast, Lunch, Work Clothes, Casual Clothes, etc.
Step 3 – Decide Which Expenses Are Absolutely Necessary & Delegate Part of Income for These
Next, you should figure out which expenses will not change and are absolutely necessary each month. For me, this includes rent, student loan payments, cell phone bill, insurance, etc. You then want to take subtract these expenses from your income. You will then be left with how much money you have for everything else – both other expenses and saving.
Step 4 – Delegate Part of Remaining Income to Other Necessities
After you know how much money is tied up in unchanging, absolutely necessities, you should then take a look at your other necessary expenses. Some that come to mind are food and transportation. You will want to start by figuring out the minimum amount of these things you need to survive (or not get fired). Subtract this from your total income. Don’t worry, if you love eating out you can come back later and add some more onto these categories.
Step 5 – Delegate Remaining Income as You Desire
So you have all of your necessities covered. Hopefully you have some money left to cover everything else. If not, you may want to reconsider your necessary expenses and see if you can make them more inexpensive (perhaps by moving somewhere cheaper, finding a new form of transportation, etc.).
Now, you’ll want to delegate the remaining money how you’d like. You can put it towards clothing, nights out on the town, extra food (like me), entertainment, savings, investing, etc., etc.
Step 6 – Track Your Spending & Tweak as Necessary
So you now have somewhat of a budget. It may seem pretty general but it should get the job done. The next job is to track your budget in some way. My preferred way is the mobile app Mint. It makes it really easy to specify how much money should go into different categories and automatically categorizes your purchases into these categories. It even gives you alerts if you are going over budget. If you like to do things the very old fashioned way or kind of old fashioned way, you may opt to track it by hand (bleh) or by using some sort of budgeting spreadsheet on Excel.
As you start tracking your budget, you will most likely realize that the original amounts your put in for your budget were way off. You then should see where you’re not spending as much and where you’re spending more, then adjust as necessary.
Pretty simple, right?
It may seem like this is too short to work, but it gets the job done for me and I’m sure it can work for you too. It took me a few months when first starting to find the ideal amounts to allocate to each category, but after some adjusting I am pretty consistent now.
Since budgeting I have been able to save more money, invest more money, pay off debt faster, and I feel much less stressed and anxious about my finances, in general.
How do you budget? Any tips or tricks that make your life easier? Thanks in advance for your comments!