As my friend J-Money (okay, we've never met in person but he cracks me up and I love his blog) would tell you, Budgets Are Sexy. But not all of them. Some are just straight-up Debbie Downers. Before I get into my budgeting secret and awesome template (pretty sexy if I don't say so myself), let me welcome all of J's readers from his post featuring my paycheck distribution graphic today - thanks for stopping by! J-Money: Earmuffs. Everyone else: I hate budgets. Especially ones that break spending down into micro-micro-micro categories like "Beauty --> Hair --> Highlights." Don't get me wrong - I love the idea of retroactively seeing exactly how I've spent my money, especially by sub-category. That is useful. Trying to project spending in $20 increments on a monthly basis across 25 categories is not.
Enter my Four-Step Budget (I really should think of a sexier name)
As far as I'm concerned, your budget should include four numbers:
- Total Monthly Income
- This includes: paychecks, side jobs, anything that brings money into your bank account
- Total Monthly Must-Have Expenses
- This includes: Rent, utilities, cell phone bills, anything that will incur late fees; groceries
- This should also include automatic savings deductions. Saving is a must!
- Total Monthly Nice-to-Have Expenses
- This is more variable, but try to estimate. Are there things that you KNOW you spend money on every month like going out to eat? My "nice to haves" are things like getting my nails done, going out to eat, and my addictions: Starbucks and Amazon books.
- This does not include: one-off purchases (like a TV), major shopping trips or major travel (unless you take frequent weekend trips).
- Allowance (The Leftovers)
- This is where your math skills (or my handy template) come in. Subtract your total expenses from your income to get your allowance. This is the money left-over each month for you to spend as you'd like - shopping, weekend travel, etc. For bigger purchases, you may want to start a separate savings account and add that deduction to your "must have" column. Check-out my earlier post on Creating a Weekend Budget.
The 4-Step Budget Template
To make this four-step budget even better, I've created a detailed template (in Google Spreadsheets) for you to copy and fill-in each of the four sections. This is not a one-shot deal (although even going through the exercise once will give you a great head-start) - this is something you should continue revising over time as you monitor your spending. I'd love to hear how the template works for you if you give it a try. If you really like it, do me a favor and give me a rating on Google's Template Gallery:
Need Some Help Getting Started?
Let me also take this opportunity to make a shameless plug for my coaching services! I'm not a financial planner and won't be giving you specific advice, but I will help you address major problem areas, make sure your spending is in line with your values, set goals around money management and implement practical systems that will help you feel like you're in charge of your money (not the other way around). Click here to sign-up for a free 30-minute session.
Not sold on my template? J-Money has a great list of Best Free Budget Templates & Sites.